For two consecutive months, Ohio income tax collections have fallen noticeably short of estimates, although overall tax revenue remains on target through seven months of this state fiscal year.
Income tax revenue came in nearly 6 percent below estimates in December, followed in January missing the mark by more than 7 percent — a total of $124 million short for the two-month period.
The slump has scrambled what was, prior to November, a solid first five months of income tax collections. Now, through seven months, income tax revenue is $121.5 million below estimates, or 2.2 percent.
January also marked the second consecutive month that income tax revenue fell short of what was raised in the same period one year prior.
Kimberly Murnieks, Gov. Mike DeWine’s new state budget director, said employer withholding in January was $61 million above projections, but estimated income tax payments came up $160 million short. Other states, she said, are seeing similar trends.
“We are still examining the data. We won’t have the full picture until April,” she said. “We still believe that part of that is timing, based on people modifying how they are paying their estimated payments based on federal tax law.”
The federal tax law changes signed by President Donald Trump limits to $10,000 the amount people can deduct in state and local tax payments on their federal tax returns, starting in 2018. Previously there was no limit, Murnieks said, which provided an incentive for some higher earners to pay as much of those estimated state tax payments as possible before the end of December.
“Our employment data is still strong,” she said. “At this point, we don’t have concerns on that end.”
Overall, state tax collections remain on target with estimates, thanks largely to sales tax coming in 2 percent over projections. Murnieks said the budget also is still heading toward a year-end surplus, thanks largely to declining Medicaid caseloads tied to continued improvement in the national and state labor markets.
Through December, Medicaid general revenue fund spending was $314 million below estimates, and the budget office estimated the surplus on June 30 would be $389 million.
“Our picture still looks solid,” Murnieks said.
DeWine will introduce his first two-year operating budget in March. Lawmakers have until the end of June to pass it.
Reach Jim Siegel at email@example.com.