01/13/2006

By BOB LEWIS  / Associated Press

Continued strong tax receipts from the self-employed and investors and an enormous surge in corporate tax collections accounted for general fund revenue growth of 10.4 percent last month.

Finance Secretary John M. Bennett wrote in his final revenue report to departing Gov. Mark R. Warner on Thursday that general operating revenue for the first half of the fiscal year is up 11.3 percent over the midway point a year ago.

That means a strong economy and the 2004 tax increases are producing revenue growth far ahead of the rate necessary to sustain budgeted expenses and, if it continues, will yield a surplus easily topping $1 billion.

It's also likely to provoke renewed criticism of the tax increases within the freshly convened Republican House of Delegates as it begins work on Warner's $72 billion two-year budget proposal. Another Democrat, Timothy M. Kaine, succeeds Warner on Saturday.

The sharpest growth was in corporate tax receipts, which increased from $111 million to about $185 million, or 66 percent, over the same month in 2004. For the first half of the fiscal year, corporate tax collections were up 91 percent.

Bennett said the largest payments came from corporations that continue to invigorate Virginia's economy — the defense industry that has flourished particularly in northern Virginia and mortgage banking.

While individual income tax withholding collections, typically from salaries and wages, increased only 4.6 percent for the month, so-called nonwithholding taxes collected from the self-employed and investors grew by nearly one-fourth for the month, from $126 million to $155 million. Nonwithholding was up by nearly 18 percent year-to-date.

December's report does not include last month's Christmas sales tax collections because of the one-month lag required for retailers to collect and report the taxes.

Bennett cautioned that revenues might appear more robust than they are and said the true scope of December's growth won't be clear until it is analyzed next month alongside January's report.

"The timing of payments in December and January can significantly distort apparent growth rates," he warned. "Individual estimated payments are due Jan. 15, and the bulk of sales taxes from the holiday shopping season will be received in January."

Corporate payments from retailers are also due in January, he said.

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On the Web:

Monthly revenue reports: http://www.finance.virginia.gov/KeyDocs/KeyDocs.cfm