Commission on Government Forecasting and Accountability
Jil Tracy, Co-Chair
Michael Frerichs, Co-Chair
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December 2014 Monthly Briefing
Edward H. Boss Jr., Chief Economist

Hopes run high that the pace of economic growth will gather strength from what has been the weakest recovery in the post WWII era. Despite improvement in many business reports, the road to improved growth faces many headwinds, not the least of which is the upward direction of the U.S. economy that is in sharp contrast to much of the rest of the industrial world.

On the home front, the Consumer Sentiment Index rose to an 8 year high, retail sales came in stronger than expected and, holiday sales’ likely were the best since 2011. Adding to the buoyancy has been the sharp decline in gasoline prices together with some improvement in both employment and wages.

Industrial production rose 1.3% in November with manufacturing up 4.8% in the past year, reaching a new high. A rise in home prices and a surge in equity prices add to the optimism. And, while most prognosticators agree lower energy prices will bolster the economy, it is not without some negatives, particularly in the energy-producing states.

Despite these economic changes, the outlook for the nation as a whole have the positives outweighing the negatives and the economic expansion is expected to improve. Illinois’ economy also is expected to improve although likely to trail the national economy, but narrowing the gap that has existed.

Jim Muschinske, Revenue Manager

Overall base revenues grew $72 million in December. While personal income tax and sales tax receipts performed well, corporate income tax revenue remained weak as did federal sources.
Through the first half of the fiscal year, overall base revenues were down $380 million. However, much of that decline was expected and due to the much lower Refund Fund transfer into GRF. In addition, weaker federal sources to begin the year contributed significantly to the fall off. The economically-related sources were mixed as both personal income taxes and sales performed well while corporate income taxes weakened.
With the absence of any legislative action taken during the veto session, the income tax rates were adjusted down per current law [P.A. 96-1496]. The personal income tax rates declined from 5% to 3.75%, while corporate rates adjusted down from 7% to 5.25%.
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