RICHMOND, Va. — Virginia’s revenues continued a steady, modest climb in August, topping the same month in 2010 by nearly 8 percent, the 13th consecutive monthly increase in general tax collections.
Finance Secretary Ric Brown’s monthly memo to Gov. Bob McDonnell on Thursday cited strong growth in income tax withholdings and in non-withholding income taxes, which are paid largely on investments and by the self-employed.
Two months into the 2012 fiscal year, that leaves the state’s general tax collections nearly 9 percent ahead of where they were at the same point last year and well ahead of the official forecast for 3.7 percent growth.
With Virginia unemployment about 3 percentage points below the national average and revenue expectations reined in to reflect budget reductions made under McDonnell, a Republican, his predecessor, Democrat Tim Kaine, and the General Assembly since 2008, sustained improvement in income tax collections have made a difference.
State income taxes withheld from paychecks in August increased 13.3 percent, to $812 million from $717 million the same month in 2010. Non-withholding payments increased by nearly one-fourth, from $32.5 million to $40.5 million. Factor in fewer tax refunds, and net income tax collections were up by 14 percent for August.
Because income taxes constitute two-thirds of Virginia’s total general revenue, they are the difference between healthy budgets and poor ones.
While the economy boomed from 2004 through 2007, double-digit monthly revenue growth was commonplace, and on six occasions topped 20 percent. Through those four years, powered largely by an overheated real estate market, net income tax collections averaged 9.5 percent, according to an Associated Press analysis of state revenue data.
From 2008 through 2009, when the housing market collapse took the stock market and some major investment banks with it, monthly net income tax collections averaged a loss of 3.5 percent over those 24 months, reflecting a spike in unemployment from the worst economic downturn since the Great Depression. The state suffered general revenue losses in 19 of those 24 months, spiking with a 20 percent decline in April 2009.
The rebound began in 2010. For all of that year and two-thirds through 2011, monthly growth in net income tax receipts has averaged 6.5 percent. Overall general fund collections have increased every month since August 2010, including five double-digit increases since January.
Sales tax figures for August were down by 4.4 percent, reflecting July retailing. Because merchants send in their sales tax collections at the end of each month, figures always show a one-month lag.
The tax levied when deeds, wills, lawsuits and contracts are recorded increased by 2.6 percent last month over August 2010, the ninth time in the past 12 months the “recordation tax” has shown growth. The tax, a rough barometer of Virginia real estate transactions, posted 43 consecutive monthly losses at height of the mortgage industry meltdown beginning in April 2006. Three times, in late 2008 and early 2009, the monthly decreases topped 40 percent.