Vermont General Fund tax revenues in FY06 ended the year with surprising strength, due to a handful of revenue sources linked to high-income taxpayers: namely, personal income, corporate and estate taxes. Despite lackluster job growth, declining real wages and stagnant real household income, these three revenue categories realized huge gains in FY06 due to record corporate profits, soaring real estate-related wealth and associated capital gains. Transportation Fund revenue sources were not so fortunate, as spiraling gasoline prices dampened demand and emptied auto showrooms.
The U.S. Treasury experienced a nearly identical, and similarly unexpected, windfall in corporate and personal income tax receipts – of a magnitude that could even lead to one of the first reductions in the massive federal deficit in the past six years. These revenue sources, however, are extremely volatile and could be vulnerable to sharp declines if and when the economy next falters.
The net changes in the below chart are a combination of economic, tax and technical changes to the prior January forecast, and represent a slight upgrade to prior estimates. Economic effects are the primary source of continued G-Fund gains and T-Fund losses (of $7-$8M), with T-Fund fee changes (of $12-$13M) offsetting these losses and resulting in modest net gains.