Tax revenue collections continue to beat forecast

On August 10, Minnesota Management and Budget (MMB) released data showing that “general fund revenues totaled $1.307 billion in July.” This is $67 million (5.4 percent) more than was forecast in February. While individual income tax collections were below forecast, revenues from sales, corporate, and other taxes were above forecast.

Overall, tax collections have exceeded expectations. Revenues for the 2020-2021 fiscal year, for instance, were $2.7 billion higher than forecast in February.

This trend is not exclusive to Minnesota. Numerous states have also experienced rising tax revenues, beating the dire predictions made at the beginning of the pandemic.

Unlike Minnesota, however, these states taken measures to enact policies providing tax relief to taxpayers. According to the Tax Foundation,

So far in 2021, 11 states have enacted laws to reduce their income tax rates, with various effective dates. Specifically, 10 states have enacted individual income tax rate reductions and five have enacted corporate income tax rate reductions. In many states, these rate reductions are paired with other structural improvements to their income tax base, such as consolidating brackets to create a more neutral structure, eliminating the state deduction for federal taxes paid, or conforming to the federal government’s more generous standard deduction.

Minnesota already has some of the highest tax rates in the country. With so many states enacting reform, it means we are falling further behind. Tax reform is more than necessary.

Our forecasted tax revenue surpluses should make it easier for legislators to undertake reform.