October 25, 2013 Local option sales tax revenue up only 0.5% in October
Following last month’s huge 17.2% gain, the October (August sales) local sales 1% tax distribution rose 0.5% to $40.77 million, compared to $40.56 million last year (Table 1). This jagged-edge trend we have been watching (Chart 1) is perhaps due to the Tax Commission’s Revenue Accounting Group’s decision to turnout the distribution 2-3 days earlier. We included again a “Last 3 Months % Change” column at the end to give you a better short-term trend picture.
Over the last 3 months, the statewide 1% local sale tax is up 3.9%, about 1.5% below where it was trending in June. Several drags on the Utah economy were the continuing federal sequester and the possible debt default. In addition, the Rio Tinto landslide and slowdown of oil prices are dampening business equipment purchases. These drags will tend to impact the Utah consumer at least through October (December distribution).
On the positive side of the ledger, Salt Lake metro employment is rising at a 3% clip, ahead of gains in Los Angeles and Phoenix metro areas (Chart 2). During the second quarter several large sub sectors in the Salt Lake metro area increased employment at rapid clips:
1) Finance & insurance, up 5.5%,
2) Professional/Scientific/Technical Services, up 9.9%,
3) Educational Services,
4) Accommodations and Food Services (code for hotels and restaurants), up 5.6%.
Although consumer sentiment across the U.S. has been falling lately (Chart 3), the October reading is only down about 10 points from earlier 2013 recovery levels. In August 2011, during the default debates it dropped almost 20 points to 57.
So, we hope distributions will improve somewhat, now that Washington increased the debt ceiling and sent its employees back to work.
Economic Policy Analyst