Revenue growth slows but remains strong

NASHVILLE – Tennessee Department of Finance and Administration Commissioner Butch Eley today announced that overall January state tax revenues exceeded budgeted estimates. Revenues for January totaled $1.8 billion, which is $309.2 million more than budgeted and 8.92% greater than revenues received in January 2021.

“Total tax growth for the month January was strong, however it was notably less than the near 22% growth the state experienced in the first five months of this fiscal year,” Eley said. “Monthly growth from sales tax receipts, reflecting consumer spending during the December 2021 Christmas shopping season, remained resilient though a large part of the growth was most likely attributable to price inflation on goods sold. Corporate taxes, or franchise and excise taxes, privilege taxes and mixed drink taxes, also significantly exceeded their estimates for the month. All other taxes combined exceeded the month’s estimates by 2.19%.

“Moving forward through the final six months of the fiscal year, we expect growth rates to be appreciably lower. Growth from out-of-state online sales tax receipts should moderate; additional extraordinary federal stimulus does not appear likely; and, a shift in consumer spending patterns largely from goods to more services will provide a headwind to additional sales tax growth for the state. As such, we will continue to closely monitor our revenues and expenditures throughout the remainder of this fiscal year.”

On an accrual basis, January is the sixth month in the 2021-2022 fiscal year.

General fund revenues were greater than the budgeted estimates in the amount of $287.1 million while the four other funds that share in state tax revenues were $22.1 million more than the estimates.

Sales tax revenues were $178.9 million more than the estimate for January and the growth rate was 7.77%. For six months, revenues are $1.1 billion higher than estimated. The year-to-date growth rate for six months is 18.04%.

Franchise and excise tax revenues were $89.8 million more than the January budgeted estimate. The growth rate compared to January 2021 was 10.40%. Year-to-date franchise and excise tax revenues for the first six months of this year are 35.77% higher than this same time last year and $679.2 million more than estimated.

Gasoline and motor fuel revenues increased by 5.10% compared to January 2021 and were $6.8 million more than the budgeted estimate of $102.5 million. For six months, revenues are more than estimates by $28.5 million.

Motor vehicle registration revenues were $1.5 million more than the January estimate, and on a year-to-date basis exceed estimates by $9.1 million.

Tobacco tax revenues were $2.5 million less than the budgeted estimate of $17.6 million, and for six months they are $0.5 million less than the budgeted estimate.

Privilege tax revenues were $27.2 million more than the January estimate, and on a year-to-date basis, August through January, revenues are $89.1 million more than the estimate.

Business tax revenues were $2.1 million more than the January estimate. For six months revenues are $2.7 million more than the budgeted estimate.

Hall income tax revenues were $0.5 million more than the budgeted estimate.

Mixed drink, or liquor-by-the-drink, taxes were $5 million more than the January estimate, and on a year-to-date basis, revenues are $23.6 million more than the budgeted estimate.

All other taxes were less than estimates by a net of $0.1 million.

Year-to-date revenues for six months were $1.94 billion more than the budgeted estimate. The general fund recorded $1.81 billion in revenues more than estimates, and the four other funds totaled $125 million more than year-to-date estimates.

The budgeted revenue estimates for 2021-2022 are based on the State Funding Board’s consensus recommendation of Nov. 24, 2020 and adopted by the first session of the 112th General Assembly in April 2021. Also incorporated in the estimates are any changes in revenue enacted during the 2021 session of the General Assembly. These estimates are available on the state’s website at https://www.tn.gov/content/tn/finance/fa/fa-budget-information/fa-budget-rev.html.

REVENUE TABLES

Michelle Price is the managing editor of the Upper Cumberland Business Journal and can be reached via email. Send an email.

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