by Sarah Curry
Director of Fiscal Policy Studies
Last week Raleigh’s WRAL published an article about the projected revenues from last years tax reform citing a memo sent from the legislative fiscal research staff to a state senator. The media has been headlining misleading information because the content of the memo does not effect the revenue projection for the state’s budget. Below are responses from Barry Boardman, a member of the fiscal research staff, regarding the confusion the WRAL article created during the final week of budget negotiations.
I (Barry Boardman) wanted to notify you that press reports related to a memo we completed yesterday are completely mischaracterizing the results of that memo. Per a request, we used the tax model to see what if any changes would arise from the model when incorporating the latest IRS Statistics of Income data (2012) as it relates to H998. We could not discern any difference in outcomes. The tax model had also been updated to include the most current economic forecast and that is the predominate change in the results. The revenue reduction has nothing to do with provisions in H998. It is simply the fact (as noted in the May 2014 consensus forecast) that wages did not grow as fast as forecasters envisioned a year ago. Hopefully, it is obvious that if you project the same pace of growth but against a lower starting base you will end up with a lower number – that is all that the memo reported and I had thought rather clearly.
As a final note, the current consensus forecast (5/2/2014) reflects a similar adjustments to personal income tax collections that were picked up by the tax model.
Along with this follow-up response:
Based on collections through July, we do not believe that a new revenue forecast would yield any different results. The FY2013-14 collections were within $7 million of the revised $20 billion, and the economic forecast for FY 2014-15 has not changed since May revision. Therefore, there would not be any new information provided with a revision to the current forecast. I have discussed this information with my counterpart at OSBM and they are in agreement with this assessment.