After a slow start, Missouri's revenue picture appears to be getting better.
The Revenue Department told the News Tribune that, as of last Tuesday, it had collected more than $6.58 billion in individual income taxes for the state business year that ends June 30, as well as more than $435.7 million in corporate income and franchise taxes, and more than $1.89 billion in sales and use taxes.
If the revenues continue improving during the last two months of the 2018-19 business year, the state's end-of-the-year report will continue a general trend of having revenues increase over the previous year.
Since last August, until last month, the state's monthly individual income tax receipts had been substantially lower than the comparable period a year ago — with the year-to-date receipts each month running from 2.78 percent to 10.04 percent less than the same month last year.
"The revenue associated with individual income tax did rise dramatically in April of 2019, in comparison to the amounts paid in April of 2018," Anne Marie Moy, the Revenue Department's spokeswoman, said. "The total increase for the month was 45.25 percent."
But before the April jump, lawmakers and other state officials worried revenues might not come in the way they had predicted a year ago, when they were writing the budget for the current business year.
Their concerns were prompted by a change in federal law that went into effect on Jan. 1, 2018 — reducing taxpayers' total federal tax burden and, since Missouri's income tax calculations are tied to the federal plan, affecting the state's revenues as well.
A main key to the reduced income was the effect the change in the federal law had on the amount of taxes withheld from each paycheck. But in many cases, those changes apparently also reduced the amounts withheld from state tax payments, resulting in more taxpayers saying they had to pay in April rather than getting refunds — and fewer taxpayers saying they were getting refunds, or that their refunds this year were smaller.
Missouri government's business year — often called the fiscal year — is different from the calendar year. It runs from July 1 to the following June 30 and is identified by the calendar year in which it ends. So, the state's Fiscal Year 2019 will end at midnight on June 30, 2019 — and then FY 2020 will begin the next day, July 1, 2019.
Tracking Missouri revenues
The Revenue Department and Office of Administration together release a report every month that tracks the current year's collections from all sources, and makes comparisons with the same month a year ago, the fiscal year to-date, and the last three months of this year versus last year.
State officials track revenues in a variety of categories: individual income taxes; corporate income taxes and franchise fees; sales and use taxes; liquor taxes; beer taxes; inheritance/estate taxes; "all other taxes;" interest; licenses, fees and permits; sales, services, leases and rentals; refunds; inter-agency billings/inventory; and "all other receipts."
Income taxes — both individual and corporate — and sales/use taxes are by far the largest sources of the state's income — and the ones followed most closely to see how revenue collections are doing compared with the estimates used to build the state's budget.
Income taxes actually are collected monthly, mainly through employers withholding money from employees' paychecks.
"Employers remit withholding taxes each month for their employees, and those amounts add up to more than 70 percent of all the taxes paid for individuals," Moy said. "In addition, some individuals — and most corporations — also make quarterly estimated payments throughout the year."
The annual tax returns due in April really are a "true-up" of the taxpayers' total obligation — some have to pay more to finalize their tax bill, while others have had more money withheld than was needed to pay that bill, so they get a refund.
Chuck Pierce, a CPA who represents the Missouri Society of Certified Public Accountants in conversations with lawmakers, told the News Tribune last month the real goal of withholding and of tax planning isn't to have a big refund when tax returns are due — but "to be as close as possible on April 15 to your actual tax liability."
The Revenue Department didn't report how many refunds it issued this year nor how that compared with last year or previous years.
Faster than inflation?
Missouri's income tax collections generally have risen at a faster rate than the overall national rate of inflation.
The only exception in the last seven years to that increase in individual income tax receipts came in 2013-14, when the end-of-the-year report showed revenues were down .25 percent from the previous year.
Since then, even with a 2015 law that slightly reduces the top income tax rate each year — if revenue growth reaches certain levels — individual income tax receipts grew by 8.47 percent in 2014-15, 3.88 percent in 2015-16, 2.27 percent in 2016-17 and 5.57 percent in 2017-18, the last full business year for which numbers are available.
Sales/use tax receipts also have shown an increase of at least 2 percent in every year since 2013-14.
But the corporate income tax/franchise fee receipts, which are the smallest source of state income among the top three sources, have been more volatile — partly as a result of lawmakers reducing the size of that tax several years ago.
It fell more than 16 percent in 2015-16, then another 7.09 percent the next year, before returning to a 6.12 percent increase in 2017-18.
Tax refund delays
For several years, taxpayers complained of delays in getting refunds in a timely fashion — complaints that still can be heard in 2019.
In 2017 and 2018, State Auditor Nicole Galloway launched audits on the Revenue Department's handling of those refunds.
In January 2018, an audit said the department "deliberately delayed issuing refunds to some income taxpayers."
The Nixon administration had argued it was a cash-flow problem — that it couldn't make refunds when there wasn't enough money available to make the payments while also running state government's daily operations.
Galloway also noted those late refunds were more costly to the state, after lawmakers in 2015 said interest payments had to be added to refund payments made more than 45 days after April 15, when the previous law didn't require interest payments to be made until the refunds were at least 90 days late.
Last June, the department said it took 23 fewer days to issue income tax refunds in 2018 than in 2017 — with an average of only 13 days in 2018, down from 35 days in 2017.
And this year is even better, Moy told the News Tribune last week.
"Average turn-around times are (about) eight days," she said. "We have issued more individual income tax refunds year-to-date than this time last year."
Moy said there are exceptions to the average turn-around time.
"On Nov. 13, the Department did go live with a new integrated system — a once-in-a-generation upgrade to a decades-old system that was no longer efficient," Moy said. "Anytime you bring a new system online, you can expect some growing pains."
And that could include delays in issuing refunds.
"Every year, a certain percentage of returns are flagged by our system and need to be manually processed, and that does take more time," she said. "A number of things can flag a return, including filer error and potential fraud alerts.
"These notifications are essential to helping us best protect our customers — the taxpayers."
When asked how many returns still were being processed nearly four weeks after the April 15 tax filing deadline, the department did not respond.