January revenue figures were released on February 13, and Secretary of Finance Aubrey Layne made presentations to the House Appropriations Committee and Senate Finance Committee on February 14. Overall General Fund (GF) revenues rose 5.1 percent in January relative to January 2017, and collections have grown 5.8 percent on a fiscal year-to-date basis, ahead of the forecast of 3.4 percent growth. Payroll withholding increased by 14 percent (growth partially attributable to an additional deposit day in January) and grew by 4.7 percent on a fiscal year-to-date basis, ahead of the forecast of 3.5 percent.
Nonwithholding collections grew by 20.2 percent on a year-to-date basis, far outpacing the forecast of 4.3 percent growth. Sales tax collections, although slightly ahead of the forecast on a year-to-date basis, were somewhat disappointing; December and January collections, reflecting the Christmas shopping season, were 0.4 percent above collections in December and January 2017. Secretary Layne speculated that gifts of services rather than goods and an increasing trend toward online shopping might be factors in the lackluster sales tax collections.
Although the overall revenue picture is encouraging, the Administration and General Assembly leadership are taking a cautious approach to the state’s revenue projections, opting not to re-forecast revenues mid-General Assembly session. Secretary Layne told both committees that it is difficult to determine how much of the windfall in nonwithholding collections is due to “wealth events” such as the sale of a business and how much is a result of tax planning strategies influenced by the federal tax reform legislation enacted in December 2017.
The state Department of Taxation is working to understand the ramifications of federal tax reform, but does not expect to complete its review before the end of the General Assembly session. House Appropriations Chairman S. Chris Jones suggested that a special session to revise Virginia’s tax code in light of the federal changes might be scheduled in fall 2018, perhaps in October.
Secretary Layne’s revenue report is available here and his presentation to the money committees is available here.
VACo Contact: Katie Boyle