Revenue collected by the local one percent sales tax in Allegheny County fell by 5.4 percent in February compared to a year earlier. That means overall sales taxes fell by 5.4 percent as well since the same items are taxed at both the normal 6 percent rate and the one percent add on.
Revenue at the Regional Asset District (RAD) was $6.2 million, down $357,000 compared to February of 2012. Since RAD gets half of the one percent revenue that means the County gets one fourth of the $12.4 million total collected and the other municipalities divide the remaining fourth, each of which will see a 5.4 percent drop as well. The state coffers also took a hit of $4 million dollars from Allegheny County sources due to the sales decline here.
What does this mean? Well, certainly it means that taxable sales were off by 5.4 percent, that’s a given. The larger questions are why were sales off and was the sales decline widespread across the region and state? Obviously, a drop in sales tax revenue of 5.4 percent at the state level would be a large number indeed. Continued for any length of time such a series of monthly declines would begin to put the fiscal year collections at risk of not hitting the budgeted amount.
The sales decline could have been weather related; there was a lot of bad winter weather. In that case we should see a rebound in the next month or two. On the other hand, if the sales decline is tied to the re-imposition of the 2 percent contribution requirement for social security, the rise in the top tax rate on personal income, the recent abrupt slowing in employment growth and the likely effects of Obamacare on household and business spending, then the sales slowdown can be expected to continue for a while. An eventuality certain to force even harder decisions by government officials as regards dealing with budget shortfalls. Because not only will sales tax revenue remain below budget projections but so will income tax revenue and other revenues that are lowered when economic activity slows, such as fuel taxes.
Let’s hope the weather explanation is correct. But the jury is still out and the other explanation is certainly plausible.