- The Washington Times - Saturday, February 14, 2009

RICHMOND | Virginia tax collections for January fell 15 percent, resulting in the worst year-to-date crash in state revenues on record.

January’s long-awaited state revenue report, released Friday by the administration of Gov. Tim Kaine, a Democrat, marks the sixth consecutive monthly decline in general tax receipts from an economy in free fall.

Through seven months of the current fiscal year, the state is 5.5 percent short of anticipated revenues used to construct the budget less than a year ago. Those estimates already have been lowered three times.

The historic plunge will force Mr. Kaine, likely on Monday, to again lower the general-fund-revenue forecast that pays for such core government services as health care, education and public safety.

A surprising drop in individual income tax collections and weak Christmas sales were to blame for this January’s woeful results.

• Taxes withheld from paychecks, which comprise nearly 62 percent of the state’s general fund, declined by 10.6 percent from January 2008.

• “Nonwithholding” taxes, paid chiefly by the self-employed and by investors, dropped by 26 percent from the same month a year before.

• Retail sales and use taxes for December - the month reflected in January’s report - fell by nearly 1 percent from the heart of the 2007 holiday season, a result much weaker than officials had hoped.

“The weakened labor market has caught up with us,” said Finance Secretary Richard D. Brown, who prepared the report for Mr. Kaine. “And most of that happened in the last 10 days or so of January.”

That coincides with news of the liquidation of the Richmond-based Circuit City electronics retail chain and Volvo’s announcement of 650 layoffs at its Pulaski County truck plant.

“What we’re seeing is worse than either the 1990 or the ‘02 recessions,” Mr. Brown said.

The downturn in nonwithholding tax collections was expected. Mr. Brown and state Taxation Department officials had noted a conspicuous drop-off in deposits.

The shock came in payroll withholding. Because it accounts for the bulk of the budget, any downturn there is troubling.

“We were running 2 1/2 percent ahead in December, and now that’s just flipped,” Mr. Brown said. Through December, payroll withholding was running 5.9 percent ahead of collections in the same six months of 2007 and well ahead of the budgeted growth forecast of 3.4 percent.

After January’s poor performance, year-to-date withholding collections fell to 3 percent, and the 0.4 percent difference between that number and the forecast represents about $45 million in revenue.

January’s report also gives a better picture of what is shaping up as the worst drop in holiday shopping since Virginia began keeping records in the early 1960s. Taxes collected from November and December sales were down 8.8 percent, nearly triple the 3 percent slide economists predicted.

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