Posted on: Saturday, November 10, 2001

State startled at high tax collections for October

By Kevin Dayton
Advertiser Capitol Bureau Chief

State tax collections grew last month to the surprise of state officials, who had expected the tax take to abruptly drop off after the Sept. 11 attacks.

Instead, tax collections for the last four months grew by 3.1 percent over last year's tax collections for the same period. Collections for October were 6.5 percent above collections for October 2000.

That startled tax officials, who had expected the post-Sept. 11 drop in business to show up in last month's tax filings. The tax filings for October generally reflect business that was done in September.

State Tax Director Marie Okamura said the impact of the stalled economy will show up more clearly in state tax collections next month.

"The numbers really are deceiving because it can make it look as though we shouldn't be concerned. I think we should be concerned," she said.

The new tax collection statistics show some evidence of a slowing economy in payroll withholding taxes, which declined by 9 percent last month as workers were laid off.

But excise tax collections showed a surprising 6 percent increase last month, which Okamura said may have been caused by residents spending the federal tax refunds that were part of federal tax cuts enacted by Congress this year.

Okamura also said tax collections for last month were artificially boosted by what is known as the "weekend effect," when the end-of-the-month filing deadline falls on a weekend. Taxpayers can file on the next business day after the weekend, which pushed some collections from September to October.

A panel of state economists has predicted that state tax collections will grow by about 5 percent this year over last year, and the state budget for this year and next year was based on that assumption. If tax collections come up short, lawmakers and Gov. Ben Cayetano will have to impose cuts to balance the budget.