Md. goes past $2 billion in sales taxes Collections hit record for second-highest source of state funds

Gain is $49 million

After the blizzard, consumers went out and spent money

September 16, 1996|By Mark Guidera | Mark Guidera,Md. Comptroller of the Treasury Pub Date: 9/16/96SUN STAFF

Buoyed by consumer spending on computers, apparel and restaurant meals, Maryland collected more than $2 billion in sales taxes during the fiscal year ended June 30, a $49 million gain over the prior year's collections.

The final tally for how the state made out from its collections of sales taxes, its second-largest source of funds behind income taxes, marked the first time the state has crossed the $2 billion threshold, state treasury officials said.

The collection milestone was the result of a 2.5 percent increase in sales and use tax revenues over the prior year, higher than the $24 million, or 1.3 percent, gain state economists had forecast in March.

But the gain was also the smallest since 1992, and just enough to keep up with inflation.

The sales tax revenue increase was also a much weaker gain than the state had in 1995 and 1994, when receipts went up 7.1 percent and 5.6 percent respectively over the prior years.

Still, said state experts, the slight increase in this year's tax revenues pointed to a rebound in consumer confidence during the spring and summer after flagging last winter as a result of the East Coast blizzard, the shutdown of the federal government, and the furloughs of many federal workers who live in Maryland.

"Maryland's economy looked very weak at that time, but there was a nice spring rebound," said Ann Franklin, chief economist for the state's Board of Revenue Estimates.

Between April and July (the last four months of the Aug. 1-to-July 31 fiscal year used to count sales tax receipts), the state saw a 5 percent increase in sales and use tax receipts, said Franklin, a clear sign of renewed consumer confidence.

Sales taxes are those taxes collected on sales inside the state, while "use" taxes are those collected on purchases made by residents and businesses outside the state but shipped to Maryland, such as catalog orders and business supplies. The current rate for both taxes, which are used to fund general operations of state government, is 5 percent.

Said Marvin A. Bond, a spokesman for the state comptroller's office, "Consumer confidence came back very strongly. There was a big question in March if that would happen."

That renewed confidence in the state and national economy triggered strong consumer spending on computers and other home electronics, which led the rebound, said Franklin.

Sales tax receipts in the furniture and appliance category, which includes computers and electronics, generated $272 million, a 7.3 percent increase over the prior year, according to the comptroller's office.

Other categories that showed strong growth included taxable food and beverages, made up largely by restaurant sales. Tax receipts in that category rose 2.6 percent to $420 million.

General merchandise, which includes apparel, also helped fuel this year's sales tax growth, said Bond.

General merchandise sales taxes went up 4 percent to $371 million, despite a weak showing during the Christmas buying season, said Bond. Sales receipts in that category showed consumers were again buying clothing in department and apparel stories, a retail sector that has been in a flat or downward cycle for several years in Maryland and nationwide.

Bond said the sales and use tax receipts also showed a boost in business spending on capital items such as new machinery.

One sector of the state's economy that showed a decrease in revenues was construction. That sector was hurt, said Bond, by last winter's blizzard, which put a crimp in residential building, and by consumer unease about the economy after the federal government shutdowns.

As for individual jurisdictions, Baltimore City, which has lost many major retail stores to suburban growth, continued to show a decline in sales tax collections. Sales tax receipts from the city dropped $4 million in 1996 to $192 million.

Meanwhile, Harford County and Charles County, each of which has seen residential and retail outlet growth in the past several years, posted the strongest individual gains in sales and use taxes during 1996, the comptroller's office said.

Harford County's receipts rose 6.6 percent to $51.2 million; Charles County's collections rose 5 percent to $48 million.

Baltimore County and Montgomery County were the leaders for the second straight year in terms of sales tax dollars collected in 1996, with $335 million and $307 million, respectively.

Sales and use tax revenues

Fiscal year .. .. ... . ..% change

1991 .. .... .. .. .. .. .. . -2.0%

1992 .. .. .. .. .. .. .. .. .+2.5%

1993 .. .. .. .. .. .. .. .. .+8.8%

1994 .. . .. .. .. .. .. .. ..+5.6%

1995 .. .. .. .. .. .. .. .. .+7.1%

1996 .. .. .. .. .. .. .. .. .+2.5%

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