Virginia tax collections reflect economy

RICHMOND, Va.—Virginians are taking home less pay, spending less in stores and still are getting hit on their investments, new state tax-collection statistics show.

Business profits are up sharply, the statistics show, but economists say that with retail sales lagging, when that will translate into new hiring and investment is unclear.

“It really looks like a jobless recovery,“ said Carl M. Colonna, an economics consultant and retired economics professor at Christopher Newport University.

State tax-collection data compiled for the secretary of finance’s monthly revenue report show the money withheld from Virginians’ pay checks, a rough tally of wages, fell sharply in October from last year’s depressed level when the sluggish national economy was knocked into a tailspin by the meltdown of the financial markets.

The 8 percent drop is far more than the 3 percent decline in the number of jobs in the state.

“That means there’s a lot of underemployment,“ Colonna said.

It may reflect shorter hours, furloughs, pay cuts, or people who have lost jobs finding new ones at lower pay, he said.

“I’m not at all convinced we’re out of the woods,“ said David Garraty, an economics professor at Virginia Wesleyan College.

“I just don’t see a lot of green shoots out there,“ he said. “It feels like it’s going to be a long, slow climb.“

Roy Pearson, Chancellor Professor Emeritus of Business at the College of William and Mary, said the decline in income reflects fewer jobs and a shift in the mix of jobs here.

There are relatively fewer jobs in high-paying areas such as construction, manufacturing and professional services than is usual in Virginia, he said.

Virginians aren’t doing well with other ways of making money either, whether through investments, farming or other small-business activities.

Their payments of estimated income taxes—the sums people are supposed to pay if withholding isn’t likely to cover all their tax bills—are down 24.8 percent this year, the tax-collection figures show.

At the same time, the state is writing big tax-refund checks, mainly because wealthy Virginians who filed state tax returns under extensions from the May 1 due date had been hit hard by last year’s financial market meltdown, Secretary of Finance Richard D. Brown reported.

Those filers had deposited estimated taxes last year then ended up being more than they really owed, once they counted up investment losses. When their returns came in, the state found it owed them money. October refunds were up 45.3 percent from last year’s level.

The state’s corporations are doing better, however.

Though profits were down much of the year, reducing collection of corporate income taxes, October saw a 68.7 percent jump from last year’s level, the tax-collection report showed.

Colonna said much of that rise in profits reflects cost-cutting—including the layoffs that made Virginia’s and the nation’s jobless rates soar—rather than increased revenues.

“But if you keep cutting faster than sales fall, it’s not clear how long you can continue,“ he said.

And sales, at least in Virginia, still lag.

October collections of sales tax, which reflect sales made in September, were down 5.4 percent from the year before.

Richmond and its suburbs fared worse than the state as a whole with the city seeing a 14.4 percent decline in taxable sales, Henrico County an 11.6 percent decline, Hanover County a 10.5 percent decline and Chesterfield County a 9 percent decline.

In the Tri-Cities, where local leaders say the expansion of Fort Lee promises long-term gains in business activity, sales were more vibrant.

Hopewell posted an 18 percent increase in sales-tax collections and Petersburg a 4 percent increase. Colonial Heights, which has the most retail sales in the Tri-Cities, saw a 1.8 percent decline in tax collections.

“The consumer needs to step up to the plate,“ Colonna said. “But they’re not going to until more people start finding jobs.“