Imagine you are responsible for projecting state tax revenues for the 2022-23 fiscal year commencing July 1. Here are some things you know:
- 70 percent of revenues are derived from personal income tax (PIT)
- In 2019 (the last year for which there is published data):
- 17.5 million PIT returns were filed
- 39 percent of PIT revenues were paid by 0.5 percent of filers
- Net capital gains were 9.7 percent of taxable income
- Because of its dependence upon capital gains and a tiny number of taxpayers, PIT liability can vary widely; eg, revenues from PIT rose 25 percent from 2016 to 2019 but dropped 27.5 percent from 2000 to 2003
In January, the Department of Finance (DOF) predicted $130 billion of PIT revenues for 2022-23. Tomorrow DOF will present the “May Revision” to that budget, which is the last forecast of tax revenues before the 2022-23 budget must be enacted by the legislature and governor no later than June 30. How much PIT for the 2022-23 fiscal year should DOF expect?
