Tax revenues continued their months-long plunge in July but showed signs of stabilizing and possibly beginning a rebound, the state’s revenue chief told lawmakers Wednesday.
Mike Allen, director of research for Maine Revenue Services, reported that revenues to the General Fund, which supports most of the state’s government, were $10.8 million under budget in July compared to projections. That’s a drop of approximately 4.6 percent.
“A very preliminary report that we ran this morning once again showed declines across the board,” said Allen to the Legislature’s Appropriations Committee on Tuesday. “This recession has been not only deep, but it has been prolonged.”
Sales and use taxes and individual income taxes led the continued decline, coming in $11.3 million and $8.3 million under budget, respectively.
The tourism industry suffered in June, said Allen, which is partially attributable to the poor weather. Restaurant sales declined by 6 percent and lodging facilities saw a 19 percent drop.
Allen said anecdotal evidence indicates the so-called “Cash for Clunkers” program, which provides a federal government subsidy for trading in older cars for more fuel-efficient vehicles, is helping the situation. But he warned the program might have negative consequences, such as canceling out purchases that would have happened months from now or causing consumers to take on debt they can’t afford.
“Clearly, the way the economy is going, people’s income is not increasing,” said Allen. “People are now taking on quite a bit of debt in these purchases that may impact other purchases.”
Sen. William Diamond (D-Windham), Senate chairman of the Appropriations Committee, said he has heard from tourism entrepreneurs in the Sebago Lake region that business has increased substantially in July. He asked Allen if that’s also the case elsewhere in the state.
“Driving around, I’ve noticed that it seems like restaurants are full and the weather has improved,” said Allen. “One other thing that seems to be going on is that unemployment numbers seem to be stabilizing. People may be feeling a little better about going out for a meal or going out for the weekend.”
Rep. Emily Cain (D-Orono), House chairwoman of the committee, asked if those indications constitute a trend.
“A lot of people do seem to be of the opinion that the economy has bottomed out,” said Allen. “I would hope at the end of the summer and into the fall we’ll start to see some improvement.”
