RICHMOND, Va. — Virginia’s general tax collections dipped slightly in August thanks to a routine drop in collections of individual income taxes withheld from salaries and paychecks and a decline in sales tax receipts.
August’s 4.8 percent drop, from $847.8 million last year to just over $800 million last month, follows a 13 percent surge in July. But it normalizes the state’s fiscal picture at a year-to-date growth rate of 3 percent just two months into the current budget year. That’s ahead of the 1.5 percent annual growth target on which budgeted state spending through next June is based.
Allowing for tax policy changes that took effect July 1, however, year-to-date revenues would be 3.6 percent ahead of the same point last year.
The July decline in the income taxes withheld from salaries is attributable at least in part to a quirk of the calendar — having one less deposit day last month than in August of 2012. So-called “withholding” taxes exert extraordinary influence over the state’s overall revenues because they account for nearly two-thirds of all state general tax collections. Factor in extraordinarily strong collections in July, income tax withholding is up 5.8 percent year to date over where it stood a year ago.
Sales tax collections, which reflect July retailing, were down by 5.6 percent in the most recent report, the third monthly decline in four months. However, compensating for the accelerated sales tax program and the transfer of a share of the sales tax to transportation as required under the transportation funding reform law the General Assembly approved in February, the year-to-date sales tax decline is 1 percent.
August marked the first monthly decline since January 2012 in the tax paid to record real estate deeds as well as lawsuits, wills and contacts. That ended 18 consecutive month-over-month increases averaging 19 percent in recordation tax collections reflecting a rebound in Virginia’s real estate markets after the home mortgage industry meltdown five years ago. August’s receipts of $31.4 million were down 1.9 percent from $32 million in August 2012.
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