Six months into the new fiscal year, Maine’s coffers are flush with higher-than-expected receipts from sales taxes and personal income taxes. The state reported Thursday that tax revenues are running about 13.5 percent above revenues received at the same point a year earlier, a nearly $200 million difference.

The unexpected boost from retail sales and personal income taxes was more than enough to offset lower revenues from corporate income taxes, which reflected payouts for tax credit programs such as New Markets, and from historic preservation tax credits.

According to the Maine Controller’s Office, the state took in 2.1 percent more in revenue during the first six months of the fiscal year than it expected. While it may seem a relatively small percent, it adds up to a lot in dollars and cents: Maine has collected $1.67 billion in taxes and fees since July 1, according to a report from the Department of Administrative and Financial Services, $35 million more than the $1.63 billion it forecast.

Maine is doing even better in comparison to the year before, with overall receipts running nearly $200 million, or 13.5 percent, ahead of the July-December period of 2014, when it pulled in $1.47 billion.

Revenues jumped in the two big categories. Sales taxes rose to $685.2 million, up 27.4 percent from the $537.8 million collected the year before. And individual income taxes collected since July 1 were $790.8 million, up 14.9 percent from $688.4 million in the last six calendar months of 2014.

SAVINGS BOOST DISPOSABLE INCOME

Mike Allen, associate commissioner for tax policy and chair of the state’s Revenue Forecasting Committee, said the economic recovery is illustrated in the numbers, with higher sales tax collections suggesting that Mainers have had more money to spend.

“It looks like 2015 was a much stronger year for Maine households than we had been projecting,” Allen said. “2015 was a very good year and that bodes well for April 15th.”

He said lower oil prices, which fell steadily during 2015, probably resulted in more disposable income for Mainers, who are heavily reliant on oil to heat their homes.

Auto sales likely drove a big chunk of the increased sales receipts. Although the state won’t have December numbers until next month, Maine dealers reported a banner year in 2015. In November, auto sales tallied $340 million, an 8.5 percent increase over where sales were in 2014 through the same month, and on pace to exceed $4.2 billion for the year.

Allen said Mainers’ spending started picking up about two years ago, when oil prices started to come down and the unemployment rate continued to decline. The jobless rate in Maine has been declining for more than seven years, but the drop has accelerated in the past two years, reaching 4.0 percent in December. The lowest rate in nearly 15 years reflects the 26,831 unemployed Mainers out of a workforce of 676,627 people in the state.

Allen said estimated tax payments – a good economic indicator in Maine because of the high number of self-employed workers – were up strongly during the first three quarters of the year, compared with 2014.

And that coincided with the decline in oil prices, which started to drop sharply in mid-2014. Last winter’s cold may have limited the savings during the 2014-15 heating season, but most projections suggest this year’s mild temperatures and rock-bottom oil prices could save the average Maine family more than $1,500 in heating costs.

Allen said the economic forecasting panel is fairly conservative because of the impact on government programs if revenue fails to materialize. He said the panel is meeting again Friday to come out with a February forecast for revenues this spring and that conservatism will probably be reflected in its estimate.

NOT ALL TAX RECEIPTS ARE UP

Allen said there have been some categories in which the revenues failed to meet forecasts.

For instance, corporate income taxes during the first six months of the fiscal year were $43 million, a negligible 1.5 percent increase over the budgeted amount of $42.4 million, and a 44.7 percent drop from the same period a year before when the state collected nearly $77.8 million from companies.

Allen said those taxes are hard to forecast, and that there was a high number of corporate income tax refunds, sent out in the summer.

In a memo accompanying the department’s November revenue report, Commissioner Richard W. Rosen said corporate income tax refunds were expected to be high for some time due to tax credits, such as those intended to spur economic development and for rehabilitation of historic structures.

Maine collected a healthy amount of estate taxes at the end of the year, even though they were not a significant amount in terms of overall receipts. December’s revenue from estate taxes shot up 560 percent, from $746,671 in December 2014 to $4.9 million last month.

Allen couldn’t offer a good explanation for the big increase.

Estate tax forecasts, he said, are particularly tricky, because the amount collected depends on factors such as whether a spouse is still living and when the person dies.

“You’re never going to get it right,” he said.

Overall for the six-month period, estate tax receipts are down 33.4 percent, from nearly $18.9 million to $12.6 million.

Estate tax collections are likely to decrease in future years, he said, because the exemption in Maine is increasing this year to match the federal exemption of about $5.5 million. It was $2 million, he said.

James Breece, another member of the forecasting commission and an economics professor at the University of Maine, said he will urge the panel to adopt a position of “cautious optimism” when it meets Friday.

Although the results of the first half of the year are good, and the Maine economy is looking better than it has in years, Breece said 2016 has gotten off to a rocky start for the global economy. He cited the stock market’s volatility and the slowdown in China’s economy.

“If there’s a global slowdown, we’ll certainly feel it,” he said. “The Maine economy is growing, but we don’t live in isolation.”


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