Commission on Government Forecasting and Accountability
HOUSE
Robert Pritchard, Co-Chair
SENATE
Heather Steans, Co-Chair
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Meeting Notice
DATE: Tuesday, February 27, 2018

TIME: 10:00 a.m.

PLACE: Room 122B, Capitol Building

TOPIC: FY 2019 Economic Forecast and Revenue Estimate and FY 2018 Revenue Outlook Update
January 2018 Monthly Briefing
ECONOMY: A BIG PIECE OF THE ECONOMY – CONSUMER SPENDING
Julie Bae & Benjamin L. Varner, Economic Specialists

The U.S. economy ended 2017 on an upbeat and 2018 appears to be off to a good start. The Dow Jones Industrial Average, one of the most popular stock market indexes, set an all-time high reaching above 26,000 for the first time in January 2018 after hitting 25,000 in the same month. The new tax cuts are expected to stimulate the economy at least in the short-term. The jobless rate during the last quarter of 2017 stabilized at 4.1%, a 17-year low. The Federal Reserve is currently planning to raise the federal funds target rate three times this year reflecting the steadily growing economy and inflation which remains under control.

REVENUE: JANUARY RECIEPTS GROW ON STRONG INCOME TAX RECEIPTS— BUT PERFORMANCE LIKELY TIMING RELATED
Jim Muschinske, Revenue Manager

January receipts grew $886 million with the gain being almost entirely due to a strong month for both personal and corporate income taxes. While the component breakdown is not yet available, it is assumed that a large part of the increase, aside from this year’s higher tax rates, was taxpayer behavior related to the recent federal tax reform package. Taxpayers would have been incentivized to pay their state tax liabilities within tax year 2017, so as to take advantage of the SALT deductions—prior to the limitations imposed under the federal reform. As a result, it’s presumed a large amount of January’s impressive income tax performance reflects strong estimated payments. As a consequence, those positive aspects may be short lived when future final payments are made, making it more of a timing issue than reflective of true underlying receipt performance. More time to analyze this issue will be necessary before a definitive explanation can be confirmed. In addition, January had one more receipting day when compared to last year.