Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
Silver Long-Term Trend Analysis - 18th June 19
IBM - Watson Deep Learning - AI Stocks Investing - Video - 18th June 19
Investors are Confident, Bullish and Buying Stocks, but… - 18th June 19
Gold and Silver Reversals – Impossible Not to Notice - 18th June 19
S&P 500 Stuck at 2,900, Still No Clear Direction - 17th June 19
Is Boris set to be the next Conservation leader? - 17th June 19
Clock’s Ticking on Your Chance to Profit from the Yield Curve Inversion - 17th June 19
Stock Market Rally Faltering? - 17th June 19
Johnson Vs Gove Tory Leadership Contest Grudge Match Betfair Betting - 17th June 19
Nasdaq Stock Index Prediction System Is Telling Us A Very Different Story - 17th June 19
King Dollar Rides Higher Creating Pressures On Foreign Economies - 17th June 19
Land Rover Discovery Sport Tailgate Not Working Problems Fix (70) - 17th June 19
Stock Market Outlook: is the S&P today just like 2007 or 2016? - 17th June 19
US China War - Thucydides Trap and gold - 16th June 19
Gold Stocks Bull Upleg Mounting - 16th June 19
Gold Price Seasonal Trend Analysis - Video - 16th June 19
Fethiye Market Fruit, Veg, Spices and Turkish Delight Tourist Shopping - 16th June 19
US Dollar Gold Trend Analysis - 15th June 19
Gold Stocks “Launch” is in Line With Fundamentals - 15th June 19
The Rise of Silver and Major Economic Decline - 15th June 19
Fire Insurance Claims: What Are the Things a Fire Claim Adjuster Does? - 15th June 19
How To Find A Trustworthy Casino? - 15th June 19
Boris Johnson Vs Michael Gove Tory Leadership Grudge Match - Video - 14th June 19
Gold and Silver, Precious Metals: T-Minus 3 Seconds To Liftoff! - 14th June 19
Silver Investing Trend Analysis - Video - 14th June 19
The American Dream Is Alive and Well - in China - 14th June 19
Keeping the Online Gaming Industry in Line - 14th June 19
How Acquisitions Affect Global Stocks - 14th June 19
Please Don’t Buy the Dip in Nvidia or Other Chip Stocks - 14th June 19
A Big Thing in Investor Education is Explainer Videos - 14th June 19
IRAN - The Next American War - 13th June 19
Boris Johnson Vs Michael Gove Tory Leadership Grudge Match Contest - 13th June 19
Top Best VPN Services You Can Choose For Your iPhone - 13th June 19
Tory Leadership Contest Betting Markets Forecast - Betfair - 13th June 19
US Stock Market Setting Up A Pennant Formation - 13th June 19
Which Stocks Will Lead The Cannabis Rebound? - 13th June 19
The Privatization of US Indo-Pacific Vision - Project 2049, Armitage, Budget Ploys and Taiwan Nexus - 12th June 19
Gold Price Breaks to the Upside - 12th June 19
Top Publicly Traded Casino Company Stocks for 2019 - 12th June 19
Silver Investing Trend Analysis - 12th June 19
Why Blue-Chip Dividend Stocks Aren’t as Safe as You Think - 12th June 19
Technical Analysis Shows Aug/Sept Stock Market Top Pattern Should Form - 12th June 19
FTSE 100: A Top European Index - 12th June 19
Gold Surprise! - 11th June 19
How Forex Indicators are Getting Even More Attention in the Market? - 11th June 19
Stock Market Storm Clouds on the Horizon - 11th June 19
Is Your Financial Security Based On A Double Aberration? - 11th June 19
What If Stocks Are Wrong About Interest Rate Cuts? - 11th June 19
US House Prices Yield Curve, Debt, QE4EVER! - 11th June 19
Natural Gas Moves Into Basing Zone - 11th June 19
U.S. Dollar Stall is Good for Commodities - 11th June 19
Fed Running Out of Time and Conventional Weapons - 11th June 19
Trade Wars Propelling Stock Markets to New Highs - 11th June 19
Best Travel Bags for Summer Holidays 2019, Back Sling packs, water proof, money belt, tactical - 11th June 19
Betting on Next British Prime Minister Tory Leadership Betfair Markets Forecast - 10th June 19
How Can Stock Market Go Up When We’re Headed Towards a Recession? - 10th June 19
If You Invest in Dividend Stocks, Do This to Double Your Returns - 10th June 19
Reasons for the Success of the Dating Market - 10th June 19
Gold Price Trend Analysis - Video - 10th June 19
US Stock Markets Rally Hard – Could Another Big Upside Leg Begin? - 10th June 19
Stock Market Huge Cosmic Cluster Ahead: Buckle Up! - 10th June 19
Stock Market Higher To Go? - 10th June 19
The Gold Price Golden Neckline… - 10th June 19
Gold Price Seasonal Trend Analysis - 9th June 19
The Fed Stops Pretending - 9th June 19
Fed Rate Cuts Soon; Bitcoin Enthusiasts Join Wall Street in Bashing Gold - 9th June 19
1990s vs. 2010s - Which Expansion Will be Better for Gold? - 9th June 19
Gold Price Trend Analysis, MACD, Trend Channels, Support / Resistance - 8th June 19
Gold Surges Near Breakout - 8th June 19
Could Gold Rally Above $3750 Before December 2019? - 8th June 19
5 Big Lies About Precious Metals Investing Exposed - 8th June 19

Market Oracle FREE Newsletter

Gold Price Trend Forecast Summer 2019

Did Retail Sales Rise or Did Tax Rates Go Up?

Economics / Deflation Jul 10, 2010 - 12:30 AM GMT

By: Mike_Shedlock


Best Financial Markets Analysis ArticleIn response to Following Yesterday's Hype of Fastest Growth in 4 Years, June Retail Sales a "Mixed Bag" a couple of people challenged me on retail sales figures, notably a statement that state sales tax collections were still down.

Let's take a quick look at data from a few key states followed by a closer look under the hood as to what is really happening and why.

California - Statement of General Fund

Retail Sales and Use Taxes

May 2009 $3,151,394,000
May 2010 $3,546,564,000

New York - Department of Taxation and Finance

Retail Sales and Use Taxes

May 2009 $713,257,000
May 2010 $757,297,000

Texas - Texas Sales Tax Collections, Retail Establishments

May 2009 $890,080,000
May 2010 $905,600,000

Those are three huge states and sales tax collections went up in all of them. Did retail sales actually go up or did something else happen?

States Raise Taxes

The Center on Budget and Policy notes Tax Measures Help Balance State Budgets.
In 2009, 12 states have increased sales tax revenues by such means as raising rates, expanding the tax base to cover previously untaxed goods and services, and administrative changes. The following sales tax increases occurred:
  • California enacted a temporary 1 percentage point increase in the sales tax rate, which is expected to generate about $4.5 billion in fiscal 2010.
  • The sales tax was extended to the sale of tobacco products in Colorado. The state also enacted legislation temporarily reducing the rate at which it reimburses retailers for collecting sales taxes. These measures will generate nearly $70 million in the coming fiscal year.
  • Kentucky extended the state’s sales tax to include alcoholic beverages. The change will generate about $52 million each year.
  • As part of a large package of tax changes, Maine expanded the sales tax to include amusement parks and sporting events and a range of maintenance and service transactions including auto repair and dry cleaning. (The package also replaced the state’s graduated income tax structure with a flat 6.5 percent rate plus a 0.35 percentage point surcharge on income over $250,000.) In total, compared to current law, tax revenues will be modestly higher in fiscal 2010 as a result of these changes.
  • Massachusetts raised about $760 million in fiscal 2010 by increasing the sales tax rate by 1.25 percentage points to 6.25 percent. An exemption on alcoholic beverages was eliminated, generating about $79 million in new revenues this year.
  • In Nevada, the sales tax rate was temporarily increased to 6.85 percent from 6.5 percent. This change will raise revenues by $280 million over the next two years.
  • New York raised sales tax revenues by about $35 million by taxing a broader range of companies previously selling tax-free over the Internet, and certain types of transportation services like limousine and car hires.
  • Rhode Island enacted legislation requiring certain companies to collect sales taxes on goods purchased over the Internet.
  • Tennessee extended the sales tax to include software maintenance contracts and limited an exemption on computer software. These changes will generate about $10.5 million per year in new revenues.
  • Vermont expanded the sales tax to include liquor and digital downloads, raising over $3 million in new revenues in fiscal 2010.
  • Washington State eliminated a sales tax exemption on hybrid vehicles and enacted legislation designed to curtail abuse of certificates that allow businesses that buy products for resale to avoid paying the retail sales tax. These measures will increase sales tax revenues by about $70 million.
  • Wisconsin entered the multi-state Streamlined Sales and Use Tax Agreement (SSUTA) — a compact that simplifies sales tax collections for participating businesses. The state also altered its method for taxing prewritten computer software and expanded the sales tax to include digital products, such as music and video downloads and subscriptions to online periodicals. The amount of sales tax revenues that retailers are allowed to retain for administrative expenses was capped at $1,000. The state eliminated the ability of certain parent companies to avoid paying sales taxes on purchases made by subsidiaries. Sales tax revenues will rise by nearly $60 million in fiscal 2010 as a result of these actions.
The above document was written July 9, 2009. There a few additional things that have happened since it was written: A big tax increase in New York City, other sales taxes hikes in New York, a huge sales tax increase in Los Angeles county California, sales tax increases in North Carolina, and no doubt many others that I missed.

Multiple California Tax Hikes

Please consider California needs to refigure its taxes

April 01, 2009

Today, April 1 -- no fooling, unfortunately -- Californians will see a full-cent increase in the nation's highest sales tax rate, to 8.25%. But no one in Los Angeles County will pay that little. County add-ons already in effect mean that most buyers of clothes, books, electronics, automobiles and other hard goods, plus food served in restaurants, will now pay 9.25%. Add another half-cent in Avalon, Inglewood and El Monte, where voters tacked on local levies, and even more in Pico Rivera and South Gate for a stunning 10.25%. And that's just until July 1, when sales taxes rise yet another half-cent countywide to follow the voter dictate of November's Measure R tax for transportation.

Catch your breath and add it up. In July, Los Angeles County sales taxes will come in at 9.75%, and 10.25% and 10.75% in a handful of the county's smaller cities.

Vehicle license fees -- the "car tax" that swept Schwarzenegger into office in the anti-tax recall of Gov. Gray Davis -- will rise from 0.65% of the vehicle's purchase price (the value is adjusted downward annually when registration is renewed) to 1.15% beginning May 19. State personal income taxes rise this year as well.

Admittedly May vs. May will be on a same tax comparison for most of that. However, Measure R does tack on .5% for LA county.

One certainly would expect sales tax collections to rise with all of that (at least for a while). Let's see how sustainable it is.

New York Retail Sales

New York retail sales are up 6.2%, or are they?

Please consider NYC Sales Tax up to 8.875%

August 1, 2009

New York City shoppers will have to dig a little deeper into their wallets. The city raised the sales tax Saturday from 8.5 to nearly 9 percent.

It's the first, permanent tax hike in more than 35 years.

The city upped the tax to counteract economic woes brought on by the recession. City officials hope the increase will raise an additional $950 million a year in revenue.

NYC sales taxes went up by 5.8 percent in August 2009. May 2010 vs. May 2009 New York sales tax comparisons do not factor in the increase solely due to that tax hike.

Also note that according to the CEPR article, "New York raised sales tax revenues by about $35 million by taxing a broader range of companies previously selling tax-free over the Internet, and certain types of transportation services like limousine and car hires."

So, one must factor in an additional $35 million annual in New York internet-related revenue and a NYC sales tax increase estimated to bring in $950 million annually.

May over May sales tax revenues went up by $44 million.

Did New York retail sales go up, or down?

New Jersey Sales Tax Collections

Please consider N.J. sales tax revenues show continued dips

Sales tax collections are projected to remain weak for the next 15 months, contributing to a continued fiscal malaise in debt-burdened New Jersey, according to a nonpartisan budget analysis to be made public today.

The Office of Legislative Services tax and revenue outlook, which was obtained Tuesday by The Associated Press, shows tax revenues could be $82 million shy of projections for the final three months of this fiscal year. Revenues could be down about $168 million from the governor’s office projections for the fiscal year that begins July 1, the analysis shows.

The projections show much of the revenue shortfall coming from continued weak sales-tax collections.

Sales tax collections are expected to grow a modest 4.4 percent over the next fiscal year, coming off a historic multiyear decline. Between June 2008 and December 2009, sales tax collections declined for 19 straight months, Rosen said. The worst 10 months — between November ’08 and last August — the average monthly decline was nearly 12 percent.

That was written in April of 2010.

After 19 consecutive months of sales tax declines, at some point sales tax collections will rise, but one must ask a couple of questions "Is the rise really meaningful and will the expectations even come to fruition?"

Texas Retail Sales - June 2010

Here is the clincher. It's from July 8, 2010 regarding June tax collections.

Please consider Texas sales tax revenue rose 2.2 percent in June, third straight increase

That headline looks promising. However, the devil is in the details.

Texas sales tax revenue rose 2.2 percent in June, but collections from the all-important retail sector were down from the year-ago level, state Comptroller Susan Combs said Thursday.

"While overall economic activity is no longer contracting, a resumption of solid growth in sales tax collections is not yet in evidence," she said.

Sales tax receipts are a major source of funding for the state and local governments. Texas leaders are projecting a budget gap of more than $11 billion when legislators reconvene in 2011 to approve a new two-year budget.

State comptroller Susan Combs said "collections from the all-important retail sector were down from the year-ago level".

Retail sales are down, but sales tax revenue is up? How? A rise in Texas Use Taxes seems to be in the answer.

Of the three states analyzed in detail above, Texas is the only one that did not significantly raise taxes. Is Texas that far out of the norm? I think not, and I do not know about any special sales taxes at city or county levels, or user taxes.

By the way, how many cities, states, and counties had Gas Tax Hikes? Special Hotel Taxes? Cigarette Tax Hikes, Alcohol Tax Hikes? User Fee Hikes of all sorts that show up in the sales tax collection bucket?

Same-store-sales, tax hikes, user fee hikes, special taxes, etc., all combine to paint a misleading picture of what is really happening with retail sales. Because of those tax hikes, state tax collection comparisons can be as misleading as same-store-sales unless you are very careful to factor in what is really happening.

Still think retail sales are up? If they are, it's not by much and it's only in comparison to amazingly weak numbers from a year ago.

To top this picture off, it took $trillions in stimulus just to finally stabilize (at best) retail sales. The key question everyone should be focusing on is "What's Next?"

Next Shoe is About to Drop

Looking ahead, it is far more important to figure out where the economy is headed in regards to retail sales than to get sidetracked in a debate on tax collections. That especially applies to those who did not even realize the need to factor in various (and massive in some places) tax hikes and user fees.

Whatever rise there was in retail sales (if any), it has come too late to matter given the current enormous mess in state budgets. Moreover, please note that states are still hugely in trouble after siphoning off huge tax increases.

Structural weaknesses are many, and signs show the next shoe is about to drop.

Consumer Consumption Inflection Point

In case you missed it, please consider Consumption Inflection Point - No One Wants Credit; Consumer Spending Plans Plunge

Consumer credit has fallen an unprecedented 7 consecutive quarters. Moreover, credit is poised to plunge further as consumer spending plans are falling through the floor. ...

Consumer Credit This Recession vs. Last

The Contrary Investor is asking Is Consumption About To Hit A Rate of Change Inflection Point?

Maybe putting a bit of a tiny exclamation point behind the need of business spending to indeed pick up is data we saw in the consumer confidence report concerning consumer spending plans. We have not updated the following chart in some time, so here it is in all its glory.

As per the report last Tuesday, consumer plans to buy major appliances and autos hit new lows. And yes, as you'd expect post the expiration of the tax credits for home buying, plans to buy homes has retreated. Wildly surprising? Not really. But it does reinforce the message of business spending importance both in 2H 2010 and into 2011.
A tip of the hat to the Contrary Investor for explicit permission for the above snip.

Plans Match Reality

Consumer plans to buy a new home certainly matched reality as last month new home sales plunged 33% to a record low.

It stands to reason if new home sales are plunging, appliance sales will as well.

Moreover, those plans to purchase new cars looks rather ominous with all the absurd hopes pinned on manufacturing leading the cycle.

Remember this is happening smack in the face of all-time low mortgage loan rates and all-time low new car loan rates.

The Fed and Congress can only force so much demand forward before pent-up demand collapses. A 33% plunge in consumer plans to buy a new home should be proof enough.

Moreover, state layoffs loom, millions are about to lose unemployment benefits, the jobs picture still sucks, and the global economy led by Europe has stalled. Factor all of that in and the picture is not pretty.

What Will California, Other States, Do Next?

What will California do in the next wave down? Raise sales taxes to 15%?

Let's hope not, and if not, what will that do to California state public employment, retail spending, and in turn profits at retailers, restaurants, etc.?

That should not be hard to figure out, but apparently it is.

Other states, especially Illinois, wrestle with the exact same issue. In fact, all states face this key issue at a time taxpayers are already taxed to death for the benefit of overpaid pubic union workers and their ridiculous pension plans.

For those who want to look ahead instead of backwards, here is the key point ....

Retail sales gains (if any) in this Fed-sponsored reflation effort are about to crash on the rocks of reality. Attitudes have changed in a significant way. Consumers have had it with credit regardless of how cheap it appears.

Deflation Sets In

Yes folks, this is deflation.

But hey, it's a free country. If you want to believe retail sales are soaring and will continue to do so, inflation is at hand, hyperinflation is right around the corner, there is no chance of a double-dip recession, stocks are cheap, etc., then I can't stop you.

By Mike "Mish" Shedlock

Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at .

© 2010 Mike Shedlock, All Rights Reserved.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules