The state of Tennessee brought in $1.6 billion in tax revenue in May, which was 38% more than the budgeted estimate.
Through 10 months of accrual in the fiscal year, the state has collected 99% of the tax revenue it budgeted to receive the entire fiscal year, with $14.7 billion collected and $14.9 billion budgeted, according to the nonprofit Sycamore Institute.
Excess tax money will be remain in the state’s general fund until the Tennessee Legislature earmarks it against an expense.
“Just as April tax revenue receipts revealed substantial growth, May state tax revenues continue to reflect extraordinary increases compared to this same time last year when most economic activity was weakened because of the pandemic,” Tennessee Department of Finance and Administration Commissioner Butch Eley said in a statement. “When comparing May 2021 tax growth to May 2019, the monthly growth is 34.5 percent rather than the 59.8 percent growth over May 2020.”
The Sycamore Institute analyzes the sales tax revenue monthly after the state releases its numbers.
“With two months to go, that over-collection is more than double what lawmakers’ April budget revisions projected for the entire fiscal year,” the Sycamore Institute’s analysis said. “That leaves a potential unbudgeted surplus of $1.4 billion and counting, which policymakers could allocate in future fiscal years as non-recurring funds.”
Tennessee has collected nearly $1.5 billion more in sales and use taxes than were budgeted. The May numbers mirror that, with $258 million more than budgeted coming into the state.
“May sales tax revenues, reflecting April taxable sales activity, grew across all industries except for groceries and food stores, which experienced a minor reduction,” Eley said. “Corporate taxes, represented as franchise and excise taxes, exhibited the second-largest monthly growth year-to-date. Also notable is that income taxes, normally due in April, are included in this month’s receipts due to a filing deadline extension.
“While the year-to-date revenue balance continues to advance, we will continue adhering to the conservative management of our budget as we approach the end of the fiscal year. We must continue to acknowledge the role that federal funds and inflation are playing in this already volatile economy.”
Franchise and excise tax revenues combined were $85.9 million greater than budgeted in May and are $851 million more than budgeted for the fiscal year.
Gasoline and motor fuel revenues were $7.7 million above budgeted estimates for the month, tobacco tax revenues were $5 million higher, privilege taxes were $29.4 million higher and business taxes were $8.1 million above estimates.
“Revenue forecasts have a major influence on decisions about spending,” the Sycamore Institute said. “Overestimating revenues could force state policymakers to cut spending mid-year.
“On the other hand, underestimating revenues creates unplanned surpluses which can be spent the following year or saved in the rainy day fund. The trade-off of a surplus is that policymakers may have preferred to either spend the money or reduce taxes in the current year.”
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