Commission on Government Forecasting and Accountability
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C.D. Davidsmeyer, Co-Chair
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David Koehler, Co-Chair
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April 2021 Monthly Briefing
CONSUMER BEHAVIOR POST-COVID
Benjamin L. Varner, Senior Analyst and Economic Specialist

As the COVID-19 pandemic spread across the country in 2020, consumer behavior changed in response. Consumers changed how they purchased items, how they obtained their purchases, and where they consumed their acquisitions. Changes in consumer behavior such as this can affect State tax revenue such as the income tax and especially the sales tax. As such, a key question is will these new patterns continue once the country is beyond the pandemic.

THE RECENT VOLATILITY OF APRIL TAX RECEIPTS
Eric Noggle, Senior Revenue Analyst

From “April surprises” to last year’s “perfect storm”, over the last decade April’s income tax receipts have experienced significant fluctuation….These wild swings of April income tax have continued into 2021. With the pandemic persisting, the tax filing deadline was again delayed. This time, however, the deadline for individual tax filers was moved back only one month—to May 17th. [The tax deadline for corporate tax filers was not extended this time]. Although a May deadline means that final payments should still remain in FY 2021 (thereby, effectively giving FY 2021 two periods of final payments), this potential one-month delay means that April receipts are again “not normal”.

REVENUE: APRIL REVENUES CHANGE COURSE FROM LAST YEAR’S PERFECT STORM—RECEIPTS SNAP BACK DUE TO TIMING AND STRONG UNDERLYING ECONOMIC PERFORMANCE
Jim Muschinske, Revenue Manager

One year removed from receipts dropping $2.74 billion as the pandemic abruptly manifested in April 2020 revenues, base general funds revenues in April 2021 grew $1.779 billion. Continued strong performance from both personal income and corporate income tax receipts were again complemented by an impressive month for sales tax revenues. In addition, federal sources also posted an impressive monthly gain.
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Excluding borrowing related activity, through the first ten months of the fiscal year, base receipts are up $4.920 billion. In addition to a surge in federal sources, that growth also reflects the timing of income tax receipts related to last year’s [2020] filing deadline extension, as well as the positive trajectory of underlying economic conditions. Through April, combined net income tax receipts are up $3.406 billion. While approximately $1.3 billion of those gains continue to be attributed to the shift of FY 2020 final payments into early FY 2021, stronger than previously expected income tax performance continues to impress. Also viewed positively is the continued upward trend of sales tax receipt performance as net receipts are up $557 million. Only now beginning to compare against those months most impacted by the economic shutdowns of a year ago, sales taxes seem to be reflecting positive consumer reactions to stimulus payments, improving job picture, and stronger consumer confidence.