Tuesday, April 14, 2009

Less bonuses, less tax 

I'm through reading the April update of the Minnesota budget situation. One thing we find out is, you know, that demonizing of bonuses going on in political circles isn't a free good:
Individual income tax receipts were $47 million (4.5 percent) less than forecast in February. Almost the entire income tax shortfall was due to lower than projected withholding tax receipts. While lower than expected withholding tax receipts are always a matter of concern, this shortfall appears to be due to lower than projected bonus payments, not lower wages. Withholding payments generally have tracked February�s forecast quite well except during a short period in mid-March when many firms pay bonuses depending on the firm�s performance during the past year.
Also, on the state of the economy generally, the update relies on Global Insights, who are still revising 2009 GDP downward. I agree with revising down but I probably was on a higher previous level than they were. Also:
...while the worst of this crisis may soon be over, that does not mean that the economy will quickly return to normal. Global Insight�s April baseline does not show real GDP returning to pre-recession levels until the spring of 2011. Employment takes even longer to recover, with the number of jobs remaining below the 2007 peak until early 2013.
I still think this is pressing down on the state budget more than had we hired almost any other national forecasting service to drive the state forecast. This is not the Obama Administration's forecast.

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