Tax Revenues Drop Dramatically
Corporate Revenue Decline Double the Loss Built into State Budget Projections—Ouch!

BY MICHAEL NOYES

The state's share of corporate income tax revenue has dropped by historic propor-tions in the past year, according to a state fiscal analyst.

Through March of 2010 corpor-ate income tax revenues are down 58.2 percent, or $60.6 million from a year ago, according to Montana Legislature Financial Analyst Terry Johnson.

Asked if he could recall a similar dip in corporate income tax revenues, Johnson pointed to a 30.7 percent decline between Fiscal Years 2002 and 2003.

"Nothing like this," he said.

The drop in revenue comes at a time when corporate income tax revenues nationally showed positive growth of 3.4 percent for the fourth quarter, according to a report issued in March by the U. S. Census Bureau. In Montana, revenues from corporate income taxes were down 67.2 percent from the fourth quarter of 2008.

Jon Bennion, government rela-tions director for the Montana Chamber of Commerce, said it's clear from those numbers that many state businesses are starting to feel the impacts of the national recession.

"Montana typically lags going into a recession and lags coming out," Bennion said. "You can never look at those numbers and feel great about them."

Johnson said the revenue loss is even greater than the 30.5 percent reduction that had been built into budget projections. He said that will have an impact on the next biennial budget for Fiscal Years 2012 to 2013.

"It's a very bleak picture," Johnson said.

That is combined with a decline in personal income tax revenue. Johnson said through March of this year, personal income tax revenues are down 20.6 percent to $443.6 million.

The reason for the sharper drop in corporate revenue is that many individuals have more diversity in their income streams, Johnson said. Personal salary and wages account for about only 60 percent of total taxable income for individuals. Conversely, in tough economic times there are some businesses that literally are not making a profit or are  losing money.

Personal income tax makes up the larger share, about 45 percent, of income for the state's general revenue fund. That compares with 2 percent or 3 percent for corporate income tax revenue.

But a loss of 58 percent in corporate income tax revenues, "...ends up being a very large dollar amount," Johnson said.
Corporate income tax revenue through March of Fiscal Year 2009 was $104.2 million for the state, according to Johnson. This year through March it is $43.6 million.

"Corporations have just had a terrible couple of years here," Johnson said.

Bennion said the business community is also concerned about pending legislation at the federal level like cap-and-trade environmental proposals or card-check legislation involving union activity. Bennion said the Montana Chamber is urging lawmakers not to support legislation that might further burden the business community in a tough economy.
"We're encouraging our federal delegation to first do no harm," said Bennion.

Michael Noyes is an investiga-tive reporter with The Montana Policy Institute, an independent, nonpartisan policy research center based in Bozeman.

 

 

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