AUGUSTA, Maine — The numbers won’t be final for a couple of weeks, but state officials are expecting the current $26 million revenue surplus will at least double in size as corporate tax revenues continue to outpace projections.
“Corporate payments continue to come in better than we projected,” said Mike Allen, director of research at Maine Revenue Services. “Estimated payments are about $5 million over budget in the month of October. Final payments are $2.3 million over budget in October, so that surplus we saw in September is going to more than double.”
Allen said in addition to corporate income tax revenues being more than projected, corporate tax refunds are well-below estimates. He said the combination is resulting in a revenue surplus for the month as large as the $26 million that was accumulated over the first three months of the budget year from all revenue sources.
“The corporate line is going to look really, really good for the month of October,” he said.
But, Allen said, the two largest sources of state revenues, the personal income tax and the sales tax, are showing very slow growth. For example, he said for the first six months of the calendar year, income tax withholding revenues grew just eight-tenths of 1 percent.
“On the sales tax we are running behind by about a million dollars, but that will shrink in these last few days [of the month] as additional returns come in and are processed,” he said.
Finance Commissioner Ellen Schneiter said the doubling of the state revenue surplus is “certainly good news” but she cautioned that surplus would nearly evaporate if it were not for the corporate income tax surpluses.
“There could be some timing issues with the corporations,” she said. “We may have some filing for those refunds in November or December, so I want to see what happens there before we are sure of the size of this.”
But, Schneiter said, she was very happy to hear the news. She said having additional revenue on hand to pay for any needed supplemental spending for the rest of the budget year is far preferable to finding areas to cut with less than six months to go in a budget year. While lawmakers take office in December, budget hearings and deliberations will not get started until January.
“Trying to find cuts with a few months left in a budget is hard to do,” she said.
Rep. Emily Cain, D-Orono, the co-chair of the Legislature’s Appropriations Committee agreed that while the additional cash is good news, it will do little to address the state’s long-term budget needs.
“This will be a big help in dealing with the supplemental that we need to get out of the way as soon as we can,” she said. “But we are looking at a billion-dollar problem over the next two years, and the increased corporate taxes will not be enough to take care of that problem.”
She shares Schneiter’s concern that some of the additional corporate tax revenue may be one time and not ongoing. She said the fact that the personal income tax and the sales tax have had up and down months, while on balance meeting revenues projections, is a concern,
“The economy is still hurting,” she said. “We are not seeing real growth yet that we will get when people get back to work.”
Sen. Richard Rosen, R-Bucksport, the only GOP senator on the panel, agreed. He said having additional cash to pay the bills in a supplemental budget is welcome news, but a far cry from solving the state’s fiscal problems.
“That will help us in the short run getting through any bumps that we have in the current fiscal year,” he said, “ and in the long run, over the next two years, we will have to confront the billion-dollar gap that we have.”
Rosen hopes the corporate revenues continue to come in above projections to help in closing the two year budget for state government.
Schneiter said a decision years ago to change the way the state assesses the corporate income tax is paying off. Under the unitary tax method Maine assesses its tax based on the overall profit of a corporation, not just the profit they make in Maine. Most of the taxes are paid by large multinational corporations.
Allen estimates that the top 25 corporate income tax payers generate as much as 70 percent of all corporate income tax revenues.