August Monthly Briefing
LOOKING INTO THE FUTURE
Benjamin L. Varner, Senior Analyst and Economic Specialist
As we enter September, the response to COVID-19 continues to be the primary driver of the economy. After much of the country’s economy being shut down in April and May, loosened COVID-19 restrictions in June facilitated some economic rebound. However an increase of cases in July, initially in the southern states and now spreading throughout other parts of the country, has led to signs of a weakening recovery. The response to COVID-19 and the associated recession has led to varying reactions from different components of the economy. While some economic metrics have bounced back from the lows of the spring, others have struggled to reach their previous levels. This month the Commission examined what economic forecasters expect for the rest of 2020 and 2021.
COVID-19’S IMPACT ON MOTOR FUEL TAX REVENUES
Eric Noggle, Senior Revenue Analyst
…between April and July of 2019, $422 million in motor fuel tax revenues were collected prior to the tax increase. Therefore, if these tax receipts would have doubled as a result of the doubling of the tax rate, an estimated $844 million would be expected. Instead, the slowdown of activity in Illinois resulted in only $654 million being receipted between April and July of 2020. Therefore, during this time period, motor fuel tax revenues have fallen approximately $190 million below what would have been anticipated – a differential likely attributed to COVID-19.
REVENUE: AUGUST REVENUE GROWTH STILL REFLECTS TIMING FROM DELAYED TAX DAY DEADLINE—FEDERAL SOURCES ALSO GROW BUT GAINS PARTIALLY OFFSET BY WEAKER TRANFERS
Jim Muschinske, Revenue Manager
Base August general funds revenues grew $299 million overall. Combined, personal and corporate income taxes contributed $275 million to the increase as a consequence of prior-month carryover related to the delayed July 15th final payment filing deadline [see last month’s briefing for more detailed information]. In addition to that timing anomaly, federal sources were up on a comparative basis with a very weak month one-year earlier. However, a lack of transfer activity served to offset much of those gains. August had one less receipting day than the prior year.
Despite the pandemic and related economic uncertainty it has caused, through the first two months of FY 2021, base receipts are up $1.051 billion. The growth reflects the surge in July income tax receipts related to the filing deadline extension. Through August, combined net income tax receipts are up by $1.530 billion. While net sales taxes are down $21 million, that modest falloff indicates that consumer activity has managed to return to decent levels, even during COVID related disruptions.
However, the coming months may find the sledding tougher as the higher $600 per/wk unemployment benefits under the Cares Act have expired. While IDES has submitted its application to FEMA for the new Lost Wage Assistance funds, indications are the amount [$300 per/wk] and availability of the funds [estimated to be only three weeks] will be a significant drop off from previous assistance. Uncertainty is building as to what effect that sudden drop in assistance will have on the consumers caught up in pandemic related job losses.