Minnesota’s net general fund receipts for FY 2017 are now estimated to total $20.949 billion, $104 million (0.5 percent) less than projected in the February 2017 Budget and Economic Forecast. Lower than expected net individual income tax receipts more than offset net sales, corporate, and other tax receipts that exceeded the forecast. General fund revenues for FY 2017 are now estimated to be 0.3 percent greater than in FY 2016. State revenues in the final quarter of FY 2017 were $127 million less than forecast. (See page 4 for details.)

Net individual income tax receipts are estimated to end the year $260 million (2.3 percent) less than forecast. Gross income tax receipts were $142 million below forecast, and refunds were $118 million larger than expected.
Net collections associated with tax year 2016 final returns and extensions were about $292 million below the forecast. We will not know final tax year 2016 income tax liability until extension return processing is completed at the end of 2017. However, data from the Quarterly Census on Employment and Wages (QCEW) now suggests that Minnesota wage and salary income grew about one percentage point more slowly in 2016 than we had forecast in February. That is consistent with tax year 2016 net income tax receipts coming in short of forecast. In  addition, non-wage income—particularly capital gains—may have grown more slowly in 2016 than we had forecast. The Congressional Budget Office (CBO) has speculated that weak federal income tax payments for 2016 may be due in part to taxpayers shifting payments from 2016 into later years in anticipation of federal tax rate cuts. We will know more about 2016 Minnesota non-wage income when we see information from a preliminary sample of 2016 tax returns in early 2018.

On net, payments generally associated with calendar year 2017 activity—income tax withholding and estimated payments—were about $32 million more than forecast. Withholding payments were above the forecast, offsetting lower than expected estimated payments. About $15 million of the positive withholding variance appears to be due to timing of withholding collections, rather than increased economic activity.
Net general sales tax receipts are estimated to end FY 2017 $13 million (0.2 percent) above the forecast.  Lower than expected sales tax refunds more than offset gross tax payments that were below the forecast. Net corporate receipts for FY 2017 were $59 million (5.2 percent) more than projected. As with the sales tax, lower than expected corporate refunds more than offset gross tax payments that were below the forecast. Other revenues for FY 2017 exceeded the forecast by $84 million (2.5 percent).

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