Revenue commissioner ‘cautiously optimistic’

State revenues lower than forecast, but bright spots in restaurants, housing market

State revenue collections are on the uptick, but its growth is about a third what it was the year before, Department of Revenue Commissioner Richard Roberts told legislators Tuesday.

In a presentation explaining the state’s lower-than-expected tax collections for the first half of the budget year, the commissioner said much of the gap is due to an 11 percent or $81 million drop in franchise and excise taxes from businesses overpaying their taxes last April and have since used that overage as a credit or refund during the current budget year.

Roberts told reporters after the Senate Finance Committee meeting he was “cautiously optimistic” about this year’s budget growth which is currently 1.16 percent higher than last year’s. At this time in 2013, the state’s revenue had grown 3.38 percent from the year before.

With collections below expectations, Gov. Bill Haslam and the legislature will find themselves in a pickle this spring as they craft a budget while the current year’s spending plan is already around $170 million in the hole.

Senators were generally easy on the commissioner, contemplating if there’s a different way the state can collect the franchise and excise taxes without businesses having to rely so much on estimating how much they’ll owe and wondering aloud how much tax revenue is lost through economic development incentives.

Other highlights from the department’s tax collections so far this year:

* Tax collections on alcohol sales at bars and restaurants are up $2.6 million, or 7.84 percent, for what the commissioner said was a “noticeable increase” in the restaurant industry.

* Business tax is up almost $1.4 million or 3 percent so far this year.

* Gasoline taxes are up $7 million or 2.3 percent, an increase Roberts says is “probably” attributable to lower fuel prices and what he called a generally improving economy.

* Tobacco collections are down by $2.5 million, nearly 1.8 percent so far this budget period. The commissioner pointed to reduced tobacco use and suggest some of that change could also be due to the growing use of e-cigarettes. Those devices are only subject to sales taxes, not tobacco tax.

* Privilege tax collections have grown $9.9 million or 8.56 percent, due largely in part to strong growth in realty transfers reflecting increased sales in the housing market, said Roberts.

* Sales and use taxes — which make up 53 percent of the state’s total revenues — are up $115 million or 3.34 percent over last year.

* Vehicle title and registration is up for a combined increase of $4.4 million or 3.7 percent, which the department links to improved auto sales.