AUGUSTA — After the first three months of the budget year, state revenues are behind estimates by nearly $27 million, with not a single revenue category meeting expectations in September.

“All three of our top lines and other large lines on the revenue side are down in September,” said Finance Commissioner Sawin Millett in an interview Monday.

The top revenue sources are the individual income tax and the sales tax. Other large sources of revenue are the corporate income tax and the tobacco taxes.

“It certainly is not a positive picture for either the September collections or the three months to date compared to our budget,” he said.

Rep. Peggy Rotundo, D-Lewiston, the lead Democrat on the Appropriations Committee, said with all of the major revenues sources behind estimates after three months, she is very concerned there may be a trend developing and not just “month-to-month blips” in state revenue. She said part of the revenue shortfall can be attributed to tax cuts.

“The sales tax is very soft and that concerns me,” she said. “It’s a very good indication of what average Maine families have in their pockets to spend.”

The largest source of taxes is the individual income tax, projected to bring in over $1.4 billion this budget year. There was bad news both for the estimated income taxes paid by the self-employed and the withholding payments. In September both estimated taxes and withholding payments were below estimates putting the income tax $4.7 million in the red after three months.

The second largest source of tax revenue is the sales tax, projected to bring in just over $1 billion dollars this budget year. It was slightly below estimates in September, down $943,000. For the three months it is below estimates by $9.5 million, although Millett said most of that was from a one-time adjustment to meet accounting rules made in August.

“The individual income tax was down by $6.2 million in September alone, and most of that is in withholding and that is always a concern because that is a relatively current barometer of what payrolls are showing,” Millett said.

He said the corporate income tax is below estimates by $13.2 million after three months and he believes part of that may be companies taking advantage of changes in the tax code passed by the Legislature.

Those provisions allow faster deductions for investments in equipment.

“Some of that also shows up in the individual income tax because so many small businesses are pass-through entities where they pay the income tax on the business through their individual income tax,” he said.

Rotundo said those tax cuts are just the first of many that will result is less state revenue during the next two-year budget cycle.

“We’re estimating a loss of $399 million over the two years,” she said. “This is a very troubling picture.”

Sen. Richard Rosen, R-Bucksport, the co-chairman of the Appropriations Committee, said he is also concerned about the soft revenues. But, while most of the report is bad news, there are a few bright spots, he said.

“We see that the restaurant and the lodging tax is up over last year,” he said. “That is an indication that we have had a better tourism season than many expected.”

But those two-sub groups of the sales tax make up a small percentage of all the sales tax revenues. Other areas have little growth and building supplies were off by nearly 4 percent.

Rosen said he is disappointed with the overall revenue numbers after the first three months of the budget year. He said income tax withholding is a concern because it reflects the health of the consumer economy.

“The number of people employed and the hours of the work week are critical to the ability of the economy to provide people with disposable income,” he said.

Millett said he would not speculate on whether the revenue forecasting committee would re-project revenues when they meet next month. He said that depends in part on the economic forecast the Consensus Economic Forecasting Commission develops.

“There are so many areas where we are failing to meet projections,” Rotundo said. “We have a soft economy and a significant problem.”

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