Auto sales boost state taxes in September
SPRINGFIELD — Illinois sales-tax revenue increased again in September, aided by continued healthy growth in automobile sales.
Sales-tax collections were up 5.3 percent last month over September 2012 levels, according to the Legislature's Commission on Government Forecasting and Accountability. And through the first quarter of fiscal year 2014, sales-tax collections are up 7.7 percent.
About 25 percent of sales-tax growth can be attributed to an increase in automobile sales, COGFA said. Nationally, according to COGFA revenue analyst Ben Varner, automobile sales are projected to amount to at least 15.5 million units this year, the highest total since 2007. The record is 17.8 million units in 2000.
In Illinois, the record for auto sales is 860,000 units in 2001. Through July, Illinois sales were up 7.5 percent from last year's level of 550,000 units, translating to projected sales of more than 590,000 vehicles this year.
Eventually, though, auto sales will drop, as will sales-tax revenue, said COGFA revenue manager Jim Muschinske.
"What we may be seeing here is maybe an issue of timing. Ultimately, things would have to start to reflect the employment picture," Muschinske said. "This can't go on indefinitely. When that will happen, I don't really know."
The strong sales-tax collections are "somewhat surprising," Muschinske said, "given the fact that ... there's really not progress being made on the jobs side."
The state's unemployment rate remained at a dismal 9.2 percent in August.
"If you don't have more people working, then those who are working must feel better about their current situation and are able to open up their billfolds a little bit and purchase items. Why are they doing that? Part of it could be pent-up demand," he said.
Other possible contributors to the increased consumer spending include lower gasoline prices and an improved stock market.
"The markets have done pretty well in the last year. People look at their portfolios and decide they're doing OK and maybe they can afford to take a little bit of money and buy something," Muschinske said. "And with the price of fuel going down, maybe people at least have the feeling that there's a little freeing up of cash to purchase goods. You just don't know."
Income-tax collections were also strong in September, with the personal income tax up 10 percent and the corporate tax soaring 17.5 percent from a year earlier.
Overall, the upbeat revenue report for the first quarter of the year may require COGFA to revise its revenue projections when state lawmakers return to Springfield later this fall, Muschinske said.
The agency had projected only a 1.1 percent increase in the sales tax for the fiscal year and about a 2.3 percent growth in the personal income tax.
"I don't think there's any question that sales tax has exceeded expectations. I think the caution would be on the income-tax side," Muschinske said. "We had that April surprise" — an unexpected surge in tax collections that month. "We just don't know what the impact will be next year in April."
He also cautioned that the increase in revenue shouldn't prompt a call for an increase in spending.
"It's not like we don't have the bills there to pay. Whatever additional revenue you do get, there's plenty of demand for it," Muschinske said. "So people shouldn't think that the state has its back pockets full of twenties. That's not the case. We've got plenty of bills stacked up, waiting to be paid."
Also Thursday, the Civic Federation's Institute for Fiscal Sustainability said that it thinks the state's backlog of unpaid bills would decline to about $5.8 billion on June 30, 2014, from $8.8 billion on June 30, 2012.