Posted by:Robert Bliss, Director of Communication, Department of Revenue
The Department of Revenue released its monthly revenue report for January on Feb. 3 and, so far, most of the attention the report has received has focused on collections from the sales tax on beer, wine and alcohol, which have exceeded DOR estimates in five months of collections starting in September 2009.
The report notes that during these same five months, revenue from the alcohol excise tax, which has been in place for years, and which is a measure of the volume of beer, wine and alcohol sold in the Commonwealth, increased nearly 1 percent. Any increase in the alcohol excise tax collection goes against conventional wisdom, namely, that when a tax is increased one might reasonably think that consumption of the item newly taxed would go down. (For an explainer on the alcohol excise tax, click here.)
The Springfield Republican, Commonwealth Magazine, the Boston Herald and Patriot Ledger have all reported this with varying degrees of amusement and theorizing as to how consumption and tax collections based on that consumption can go both up. We don't proclaim to know the reason, but the numbers are the numbers.
Somewhat lost in the froth of this story was the fact that for the first time in 17 months, revenue from retail sales (not from sale of cars, meals, alcohol, or business-to-business transactions) increased. This reversal if nothing else means that retailers in December (keep in mind that sales tax figures are reported on the 20th of the month following) had a bit of an uptick (up 0.8 percent from the previous December). Whether this is the start of a longer term trend only time will tell, but it was a positive economic sign. The news was less encouraging in that sales tax receipts of all kinds are down 6.5 percent for the year when the sales tax increase is factored out (for those of you reading the January tax collection summary look at the category "baseline % change").
Two other points. January was the fourth month in a row in which revenues exceeded those of the same month a year ago, and also the fourth month in a row in which total revenues exceeded benchmark.
One caution flag for February is income withholding, which was $66 million above benchmark for the month of January. Such a robust performance sometimes indicates that timing is a factor; that withholding revenues that might otherwise have been received in February somehow came in over the transom in January.