State Economists Puzzled Sudden Plunge In Withholding Of Income Taxes ‘Doesn’t Fit’
August’s sudden and unexpected plunge in paycheck withholding of state income taxes has Batt administration economists puzzled.
“It just doesn’t fit with everything else that’s going on,” chief economist Michael Ferguson said. “It is a concern but not seriously unless it becomes a trend.”
Withholding collections, which account for a major portion of personal income tax receipts that make up nearly half of all the state’s revenue, were 10.5 percent lower in August than a year earlier, marking the first time that withholding has dropped below the previous year’s level since May 1988.
That decline was the reason total tax collections through the first two months of the budget year fell $6.5 million below the benchmark, which had already been scaled back because of the state’s slowing economic expansion. At the end of July, the gap was only $800,000.
Ferguson pointed out that August 1994 withholding was artificially inflated by extra pay periods at some major employers, duplicate payments by others and late payment of July taxes by a few.
“That only partially explains the steep drop in August 1995.”
Up until then, monthly withholding collections have been running 3 percent to 5 percent ahead of the previous year, and Ferguson had expected the August total to still be up 2.7 percent since employment continued to grow, albeit at a slower pace than in past years.
Although non-farm employment through July had not increased as much as it had during the first seven months of 1994, it was still up by 4.3 percent, according to the Department of Employment.
A new analysis of employment trends by department specialists is fueling concerns that Idaho’s economic transition from its traditional resource-based industries to services and manufacturing may be laced with an inordinate number of lower-paying jobs.
The analysis identified a dozen occupations that would be in the highest demand around the state between 1992 and 2005, creating over 34,000 new jobs during that period. But more than 14,000 of those new jobs pay wages of less than $5.50 an hour - under $220 for a 40-hour week. And another 9,000 pay under $10 an hour - less than $400 for a 40-hour week.
That seems to support other recent assessments that have suggested Idaho’s economic expansion, which has been one of the strongest in the nation, was more the result of dramatic population growth than it was of any real financial gain for individual workers.
Gov. Phil Batt has been cautious about the economy, first scaling about the estimate for tax collections after having to cope with a $5 million deficit at the end of the last budget year and then imposing a $26 million temporary budget reduction that lawmakers must ratified by February if it is to be permanent.
The governor has emphasized that his actions should not be viewed as fear the bottom is falling out of the economy, and he has said he believes tax collections will pick up as the spending year progresses.