The bulk of Indiana’s drop in estimated April tax revenue will likely be recovered as the delayed tax payment deadline approaches, according to the state budget director.
April's tax revenue fell approximately $964.2 million below revenue forecasts from December 2019, according to a May 8 monthly revenue report by the State Budget Agency.
Almost 80 percent of the revenue loss is caused by the deferral of tax payments from April 15 to July 15 as a result of the COVID-19 pandemic, Cristopher Johnston, director of the Office of Management and Budget, said during a May 8 briefing.
According to Johnston, the $800 million tax revenue shortfall caused by the tax filing and payment extension for individual income tax and corporate tax payments will likely be recovered with the approaching July 15 deadline. However, “while we hope that $800 million is mostly just a timing difference, we cannot avoid recognizing the risk of the inability to pay the full amount come this July,” he said.
The other 20 percent of the revenue loss is caused by a decline in sales and gaming tax revenues because of the stay-at-home orders, Johnston said. The $164 million in anticipated April sales and gaming tax revenues will likely not be recovered since many businesses and casinos have been closed, he said.
“Gaming taxes will not be collected in May as the casinos remain closed,” Johnston said, noting that state tax revenues will continue to fluctuate going into May and June.
The final quarter of fiscal 2020 was expected to be the highest revenue-producing quarter, with April being the highest month, but that is no longer realistic because of the pandemic, Johnston said.
Johnston said there will soon be “significant spending reduction targets for agency programs” in order to adjust the state’s reduced revenue.