Press Contact: Monica Klein, 917-565-0715
“Tax receipt shortfalls in April and May are of concern, but do not necessarily indicate an imminent recession”
ALBANY, NY | June 16, 2023 — Following the release of the State Comptroller’s May Cash Report yesterday, Fiscal Policy Institute Executive Director Nathan Gusdorf today released the following statements:
What the cash report says:
“The New York State Comptroller’s May cash basis report shows that total tax receipts for fiscal year 2024 to date are 3.4 percent over the projections in the Enacted Budget financial plan, with Personal Income Tax receipts to date exceeding such projections by 5.5 percent.
“Revenue projections in the Enacted Budget financial plan were revised downwards from the projections in the Executive Budget financial plan following lower than expected tax receipts this past April. The main drivers of these lower April receipts were low estimated payments and unusually high tax refunds. The trend of high tax refunds continued in May, with tax refunds rising 60 percent compared to their 2022 level.
“Two factors are likely driving these two trends: First, capital markets fell about 20 percent over the course of 2022, reducing capital gain income and driving down bonuses and profits from transactional activity. Second, the pass-through entity tax (PTET) has created significant year-to-year volatility, as all PTET receipts will eventually be refunded to taxpayers through either tax refunds or lower estimated payments.”
What the data indicate:
“The tax receipt shortfalls in April and May are of concern, but do not necessarily indicate an imminent recession and certainly do not warrant spending cuts. These shortfalls reflect weak performance in 2022 capital markets, which have shown growth and resilience since the start of 2023. Current labor market indicators remain strong, and personal income tax withholdings have remained steady in this fiscal year.
“The enacted budget financial plan for fiscal year 2024 remains balanced, but projects budget gaps beginning in fiscal year 2025. If next year’s tax revenues do fall short of planned spending, it will indicate a significant economic downturn — in which case drawing on the State’s robust reserves will be a wiser and less damaging funding solution than cutting spending.”