It's too early to tell if there is a surplus in state revenues, but even if there is, it likely will vanish by the end of the fiscal year in June 1989.
That's because any temporary surplus will be offset by waning income tax withholdings and overpayments of 1988 state income taxes that will be returned to taxpayers next year.Amid widespread talk of a state surplus that could reach $20 million, the Utah State Tax Commission has issued a message in its monthly report on tax collections that suggests any talk about a budget surplus is premature.
An economist for the Tax Commission said there is no way to determine how much the figures through Oct. 31 are over what was projected to be collected through that month, since forecasts are made only for the entire year.
"There's no number here that says, `Here's what we expected by October," said the economist, Tom Williams. Any suggestion that there might be at least a temporary surplus is only an educated guess at this point, he said.
Tax Commission forecaster Doug Macdonald, who is responsible for making those educated guesses, was out of the office for the Thanksgiving holiday and not available to comment.
However, at the beginning of the report he wrote on the October collections, he acknowledged, "Many have speculated that the state of Utah is running another huge surplus in fiscal year 1988-89."
The report goes on to remind readers that the 5 percent reduction in state income tax rates approved during a special session of the Legislature earlier this year is already causing those collections, made through payroll withholding, to fall.
Already, through October and the first 10 days of November, total income tax withholdings are $212.6 million compared to $217.3 million during the same period last year, a 2 percent decline.
That decline is probably because some employers are already using the new withholding tables that go into effect Jan. 1, 1989. However, the income tax rate decrease was made retroactive to Jan. 1, 1988, so part of the revenue collected this year will be returned to taxpayers next year.
Besides the 5 percent decrease in income tax rates, lawmakers also decided to reinstate part of the deduction for federal income taxes paid. That one-third deduction will also reduce revenues beyond projections.
Because of the changes in the state's income tax laws, the amount of payroll withholding taxes collected is expected to drop an additional 10 to 15 percent in the next few months.
The report also notes that $161.8 million was collected through Nov. 10 this year compared to $147.7 million during the same period last year, an increase of almost 10 percent.