View All Posts

May 05

Sales Tax Distribution Report & Advice

Posted on May 5, 2017 at 12:04 PM by Paige Worsham


April 2017

February 2017 Collections - April 2017 Distributions
Linda S. Millsaps



Current estimates are that the NCDOR will distribute $218.4 million in sales tax revenues to our counties and cities. This represents a $86.46 million decrease over the previous month but slightly less than a $14 million increase from the same month last year. That is a 6.88% increase over the same month in 2016, but a whopping 28.4% decline from the previous month.

april1


And once again, when Articles 43 and 46 are excluded (as these are not utilized in all 100 counties), the pattern remains essentially the same.

april2

When considering the statewide levied taxes only, the increase is 7.24% over this time last year, an increase in dollars of $13.7 million. However, it is an almost 28% decline from the previous month.

Such a substantial decline between January and February is typical.

Overall the year-over-year numbers are reflective of both the tax law changes and slow but steady economic growth in North Carolina. The Federal Reserve Bank of Richmond reports that during February our state’s labor market conditions improved at a rate above the nation, but essentially on par with our neighbors. For example, in February we added 9,100 jobs (0.2%), while Maryland’s employment increased by 11,500 jobs, and Virginia by 11,400 jobs. Year-over-year the largest areas of job growth have been in construction, professional and business activities, and a category called “other services.” Of particular note is a large increase in jobs related to the tourism and dining industries. In terms of geography, the biggest year-over-year improvements in payroll performance have been in the Charlotte, Raleigh-Cary, Wilmington, and Asheville MSAs.

Looking Ahead

Looking ahead still seems to be a bit of a mixed bag, with economic thoughts ranging from slightly positive to fairly robust. For example, John Silva of Wells Fargo Commercial notes that while manufacturing orders are solid, there was a slight reduction in output in March. The good news for the sales tax, however, is that during the same time period orders from suppliers and manufacturing employment increased. This suggests the slight weakening may not continue into April. Mike Walden of NC State is more optimistic. His economic index is showing very strong results, driven primarily by national growth and strong performance in the urban areas.

On a similar note, consumer sentiment is still strong, but losing a little momentum. Consumer spending is often driven by employment, wages, and consumer confidence. The graph below shows consumer sentiment over the past five years, with the last indicator in February 2017. As you will note, consumer confidence is still very high at 96.3. However, it has dropped some over the last few months.

april3

Another relatively positive indicator is leveling of the volatility index. Also produced by the Federal Reserve Bank of St. Louis, this captures worldwide corporate leadership concern about volatility in the world and U.S. economy. As the graph below suggests, the level of volatility has cooled considerably. Currently the index is hovering around 11 – 14. This is stark contrast to the day after the Brexit vote (25) and the day before the November election (22). As such, it appears that, for now at least decision makers are not as concerned about the impact of rising populism as they once were.

april4

In general these trends suggest a slightly better than average 2017, in terms of the state economy. However, it should be noted that “baked in” to all these indicators is an assumption of business friendly legislation moving through Washington. While much has been done to roll back agency regulations, the GOP has yet to prove they will be able to pass a budget and revamp the tax code. If these efforts happen to fail, there could be ramifications to the economic outlook.

                                    Center Icon