RALEIGH — North Carolina government tax collections have soared above expectations so far this fiscal year, as the state’s pandemic-rebounding economy has pumped consumer spending and edged the jobless rate close to pre-COVID-19 levels.
Through Jan. 31, state revenues are already almost $1.4 billion ahead of the total anticipated by the executive and legislative branches, the state budget office said Friday.
The revenue surge in state government’s first seven months of the fiscal year is happening in every major tax category, according to a summary provided by the Office of State Budget and Management. Corporate and franchise taxes, along with taxes related to alcoholic beverage and real estate transactions, are among those seeing the highest percentage growth.
The office said it now estimates overcollections will reach $2.4 billion by June 30, the end of the fiscal year.
The two-year state budget law that Democratic Gov. Roy Cooper signed in November spends $25.9 billion in state dollars this year, but it set aside well over $2 billion above and beyond the latest additional collections that will help cover next year’s budget expenses. And the totals don’t include billions of dollars in federal COVID-19 recovery dollars received.
The budget law, developed largely by Republican lawmakers, included individual income tax reductions that began Jan. 1. Those changes are reflected in the numbers released Friday.
If the projections hold to form, the surplus will mean the Republican-controlled legislature and Cooper will again have more with which to compete on as it relates to priorities for the excess money when budget adjustments are made later this year. That could include more spending, further tax cuts, or both.
The state unemployment rate for December was 3.7%, the lowest since February 2020. More than 138,000 additional people were working as of December compared with 12 months earlier, according to state employment data.
“Our decisive actions and resilient communities have helped us manage the pandemic and power a booming economy across North Carolina,” Cooper said in an emailed statement. “We need to make more investments in our workforce, education and health care that will strengthen our communities and economy for all North Carolinians.”
The Office of State Budget and Management and the legislature’s Fiscal Research Division agreed with the year-to-date numbers, state budget director Charlie Perusse said. His office said individual income tax revenues were $766 million above projected figures through January, while sales and use tax collections are $330 million above expectations.
Corporate income and franchise tax collections were 23% higher than expected, while alcoholic beverage taxes were up 20% and real estate taxes up 52%, the budget office said.
The projected $2.4 billion in overcollections remains well below the additional $6.2 billion that the state’s coffers took in during the fiscal year that ended last June 30. But Perusse noted that the previous year’s surplus was supersized in part because of a conservative forecast following shortfalls in the first months of the pandemic in spring 2020.
January’s tax collections create a stronger barometer of the state’s fiscal picture because it includes December holiday sales tax collections and individual and corporate tax payments for the three months ending Dec. 31, according to Perusse.