April tax revenue collections hint at virus fallout
NASHVILLE – Providing an early glimpse of the economic fallout from the ongoing coronavirus pandemic, tax revenue collected in April in Tennessee dropped dramatically from what was brought in during the same month in 2019.
The Tennessee Department of Finance and Administration said Tuesday tax revenues in April totaled $1.2 billion, which is nearly $855 million less than what the state collected in April 2019.
While the totals between last year and the current fiscal year is significant, it is partially clouded by the fact that several revenue streams, including certain taxes on businesses, were undercollected because of the state gave extensions for those filing due to the pandemic.
“The signs of economic downturn due to the COVID-19 pandemic have begun to appear in Tennessee’s April tax receipts,” Department of Finance and Administration Commissioner Butch Eley said in a statement.
“It has been 10 years since an economic downturn has impacted state revenues. The state’s large monthly revenue surpluses built up throughout the beginning of the year will now be tested as the pandemic’s impact begins to erase those gains.”
Although the latest totals provide an early and significant indication of the financial ramifications of COVID-19, the April revenues represent consumer activity during March, when Gov. Bill Lee began to order businesses to close and residents to stay at home.
As such, the state’s monthly revenue collections could worsen when they are released next month. Those figures will likely more accurately reflect tamped down economic activity during the state’s mandated closures.
Speaking to reporters Tuesday morning, Eley said next month’s revenue collections — which will reflect activity during the governor’s April stay-at-home order — will also be down significantly. As a result, the state has already implemented a hiring freeze and
asked departments to halt any non-essential spending.
“It’s not going to be pretty,” he said. “There’s no question about it.”
Which tax revenues were impacted?
Overall, Tennessee’s April revenue collections showed across-the-board decreases in economic activity. Sales and use tax — which typically provides more than 50% of the state’s tax revenue sources — was down by $48.9 million compared to April 2019.
Similarly, revenue collections from gasoline and tobacco in April were down compared to the year before.
Among the most significant revenue streams where the state saw a decrease was the Franchise and Excise tax – money paid to the state by corporations, limited liability companies and others based on their net income. Overall, the state collected $577.1 million less from the tax in April than the year before.
Likewise, the state’s revenue collections from the soon-to-be phased out Hall Income Tax on certain investment income was down $152.6 million compared to April 2019.
And business taxes – money paid to the state based on the gross receipts of businesses that sell goods and services – were down by $43.6 million compared to the year before.
The decrease in collections from the trio of taxes – Hall Income, Franchise and Excise and business – came after the Internal Revenue Service extended the deadline for filing and paying federal personal income tax until mid-july. The Tennessee Department of
Revenue extended the deadlines after the IRS extended the federal deadline for personal income tax.
Collections from the privilege tax — a fee paid by a handful of people including lobbyists and lawyers — were also down by $12 million from the year before. That’s likely due to the governor delaying the deadline for paying the $400 a year tax until June.
Further, motor vehicle registrations were down $8.4 million compared to April 2019. In March, Gov. Bill Lee extended the deadline for registration renewals until mid-june due to the pandemic.
Despite most of the state’s tax collections being down in April compared to the year before, a few categories saw increases. Those include taxes on motor fuel, alcoholic beverages and beer.
Combined, alcoholic drinks and beer, paid by wholesalers and liquor stores, brought in more than $1 million in additional tax collections in April compared to the preceding year. In March, the governor ordered the closure of bars but permitted alcohol to be sold to go and for delivery.
Liquor by the drink taxes, which are paid by businesses that sell individual drinks, were down.
In total, the revenue collections for the state in April was down nearly 40% compared to the same month in 2019.
The financial blow from the pandemic similarly had a major effect on tax collections for local governments, which saw $62 million, or 17%, less in terms of collections than April 2019.
Local sales taxes in April were down $2 million while local business taxes were $55 million less than the year before.
The decrease in revenue collections are the most significant since the Great Recession, Eley said. But he noted the state last saw a nearly 40 percent decline in revenue in a month in the late 1960s.
Reach Joel Ebert at jebert@tennessean.com or 615772-1681 and on Twitter @joelebert29.