State revenue is running more than $100 million behind what Hoosier lawmakers anticipated, through the first quarter of Indiana’s budget year, due to a decline in corporate income tax payments.
Between July and September, records show Indiana collected a total of $3.59 billion in revenue, primarily through the state’s 7 percent sales tax, 3.23 percent personal income tax and 6 percent corporate income tax.
However, the April revenue forecast, used to shape the state’s two-year spending plan, predicted revenue of $3.7 billion during the three-month period, a difference of $107 million, or 2.9 percent.
The quarterly revenue shortfall should have little impact on state services as Republican Gov. Eric Holcomb previously directed state agencies to hold back 3 percent of planned spending for exactly this type of situation.
The bulk of the missing revenue was in corporate income taxes, where the $123.2 million in first quarter collections was $88.7 million, or 41.8 percent, less than expected.
It also was $61.7 million, or 35.3 percent, below what Indiana took in corporate income taxes during the same period in the prior budget year.
State Budget Director Jason Dudich attributed the decline to higher-than-expected refunds and lower amounts of taxable business income.
That’s likely due to businesses delaying when they record some income, and postponing payment of the corresponding state taxes, in anticipation of Congress approving significant federal corporate tax cuts.
Indiana sales and personal income tax collections also were each 0.6 percent below estimates for the three-month period, amounting to $18.5 million.
At the same time, both revenue categories were up compared to the prior budget year. Sales tax revenue increased $42.2 million, or 2.2 percent, and personal income tax collections grew $39.8 million, or 3.1 percent.
Indiana also maintains a budget reserve totaling $1.8 billion to weather revenue declines without resorting to tax increases.