July tax
revenue divesNet state income for the month
fell $29 million from a year earlier
Net state tax revenue in July was down about $29 million from a year earlier, lending evidence to Gov. Linda Lingle's argument that she must continue a curb on state spending.
The Department of Taxation reported yesterday that July's income of $227.4 million was 20.6 percent, or $59 million, below the same month last year, but said half of that was due to a "weekend effect" that skewed the comparison.
Because the last day of the fiscal year on June 30, 2002, fell on a Sunday, tax revenue normally due on that day was not paid until July 1, artificially inflating July 2002 revenue by $30 million, said Tax Director Kurt Kawafuchi.
The revenue from general excise and use taxes, which reflect business activity and account for about half of the state's total general fund income, was off 16.5 percent from July 2002, much of that attributed to the "weekend effect."
Meanwhile, in the area of corporate income taxes, the state showed a $2.05 million outflow in state funds due to tax credits, refunds and decreases in estimated taxes.
It's 214.2 percent less than the $1.8 million collected in July 2002, said Kawafuchi. "It means we're paying out more than we're taking in," he said.
"We believe a big chunk of it was due to the Act 221 tax credits," he said, referring to the high-technology tax credits the Lingle administration failed to convince the Legislature to tighten earlier this year.
Individual income tax revenue, which accounts for about one-third of the total general fund, was down $10.1 million, or 12.7 percent.
Kawafuchi said part of that might result from home improvement tax credits adopted by the Legislature in the wake of the Sept. 11, 2001, terrorist attacks as an attempt to stimulate the local economy.
July's decline in revenue bolsters Lingle's contention that she needs to trim spending to keep the state's budget balanced, something Democratic leaders in the House and Senate contend has been accomplished.
When June's income surged 62 percent over June of 2002 and the fiscal year ended 4.3 percent ahead of the year before, House Speaker Calvin Say and Senate President Robert Bunda said there was no need for Lingle to continue imposing spending cuts in public education and other programs.
However, Lingle said that using a single month's revenue figures to project future revenues painted a false picture of the state's financial situation.
Based on the state Council on Revenues' latest forecast in May, Lingle computed a $152 million shortfall over the two-year, $7.5 billion general fund budget that began July 1 and ordered most departments to curb discretionary spending.
