AUGUSTA, Maine — State revenues in November were just about on target and the tax measure signed by President Barack Obama on Friday could help Maine’s revenues further rebound from the recession, state officials say.
“The tax bill will in at least some of the macroeconomic models push the growth rate for 2011 by a fair amount from somewhere around 2½ to 3 percent to 4 percent or more,” said Charles Colgan, chairman of the state Consensus Economic Forecasting Commission and an economics professor at the University of Southern Maine. “The bill will, no doubt, accelerate economic growth in the country and in Maine.”
He said both the stability of tax rates and tax policies over the next two years and the reduction in payroll taxes for 2011 will help spur growth more than many economic models had assumed.
“The payroll tax, for example, is worth a hundred billion dollars in additional consumer spending in 2011” in the U.S., Colgan said. He said that would help the economy grow, but the simulative effect could be reduced depending on reductions in federal spending that some in Congress are pushing.
“We will have to weigh all of the factors in the spring when we do our next economic forecast,” he said.
Jim Breece, an economist at the University of Maine and a vice chancellor of the University System, said the tax bill and its stimulative effects are “desperately needed,” with the economy growing very slowly since the recession formally ended last year. He is a member of the economic forecasting commission.
“There are a lot of people still hurting,” Breece noted.
He said the payroll tax cut was not discussed by the commission and “came out of nowhere” to be included in the tax measure passed by Congress. He agreed it would help stimulate both the national and the state economies.
“What is very difficult to do is predict what Congress will do about spending,” he said. “What they do could reduce the simulative impact of the bill.”
Mike Allen, research director for Maine Revenue Services, said state revenues in November were just about on target — with a few revenue lines a little above and a few a little below estimates — and indicate the economy is slowly improving.
“For the most part, the revenues in November were just about what we expected in the new forecast that was made,” he said.
When the re-projections were made, both individual and corporate income taxes were increased for the budget year. Allen said November revenues were “on target” for meeting the projection of an additional $111 million for the state treasury by the end of the fiscal year June 30.
But, Allen cautioned, energy prices have had significant effects in past years on state revenues, and that could happen again this winter.
“This is a time when a lot of Maine families are making their first fill-up or making their second, [and] energy prices are rising,” he said. “That hurts a lot of low- and middle-income Maine families.”
Allen said the tax amnesty program that the state ran this fall also may have shifted some revenues to earlier in the budget year than they would have normally been received.
Rep. Patrick Flood, R-Winthrop, the House chairman of the Legislature’s Appropriations Committee, said he was particularly pleased about the consistency of the revenue improvements for the last few months in both the individual and corporate income taxes.
“What that tells me is that some individuals and some companies are doing better,” he said.
House Minority Leader Emily Cain, D-Orono, agreed that stable revenues are good, but she is also concerned about economic forces outside the state that could affect revenues in the future. She was House chairman of Appropriations Committee in the last session.
“Energy prices have always been a concern,” Cain said. “It is good to have Congress take action on the taxes and provide continuation of unemployment [insurance]. But we have to keep focused on creating jobs so we don’t have to have people using unemployment benefits.”
While revenues are showing improvements, they are still at levels below what they were two years ago. For example, building supply sales taxes reported in November from October sales were $176,651, which is well below 2008 October sales of $219,877. Overall, 2010 sales taxes for October were $1.324 million, compared to $1.354 million in 2008.
Finance Commissioner Ellen Schneiter, in her memo on November revenues, stressed that it will take time to recover from the recession.
“Like the rest of the nation the Maine economy is slowly healing from the recession and is expected to track the rest of the nation over the next few years,” she said.