WASHINGTON, June 12 (Reuters) - Virginia’s revenues dropped 20.7 percent in May from a year earlier, the largest decline in 13 years, said Governor Terry McAuliffe on Thursday.
The decline was due mostly to lower income tax collections and helped keep total revenues for the year-to-date 1 percent behind forecasts. Virginia’s personal income tax returns are due May 1, instead of the federal filing deadline of April 15, making last month key for the state’s revenues.
“A significant amount of May’s collections are also from upper income individuals where a significant portion of their income is based on capital gains,” McAuliffe added in a statement.
Because federal taxes were set to increase at the beginning of 2013, many taxpayers sold off investments and made other moves to “accelerate” their income into the final days of 2012. That led to a bulge in states’ tax collections last year, and a swift fall in income tax collections this year.
Virginia also saw its withholding taxes drop 5.4 percent last month from May 2013 and its corporate income taxes plummet 33.2 percent, according to the governor’s office. Sales taxes, representing purchases made in April, were down 1.6 percent.
Withholding taxes make up nearly two-thirds of Virginia’s revenues. For the year through May, they were 2.5 percent ahead of the same period in 2013 but still lagged the forecast of 2.9 percent growth. Over the same period, sales taxes, about a fifth of revenues, were down 4.5 percent from a year earlier, which was slightly worse than the forecast of a 4.4 percent drop.
States across the country expected to see their income taxes this year decline from last year because of the federal tax law changes. But many, like Virginia, were surprised by the steepness of the drop, according to the Rockefeller Institute of Government. (Reporting By Lisa Lambert; Editing by Chizu Nomiyama)