Federal tax uncertainty casts doubt on Pa. revenue estimates

Four months into the fiscal year, Pennsylvania’s revenues are more or less on target.

A new report from the state Independent Fiscal Office shows collections are about $10 million below estimates — a figure IFO Director Matthew Knittel said is leaps and bounds better than this time last year, when state income lagged by more than 20 times that much.

The commonwealth ended last fiscal year nearly $1.5 billion below projections — a shortfall that contributed to lawmakers’ painful, protracted budget battle.

However, Knittel said the fact that revenues look better this year doesn’t mean there’s no potential for instability—especially if the Trump administration doesn’t overhaul the federal tax code as promised.

“We think, if federal tax reform does not happen, then we would lower our revenue estimate for this year,” he said.

The uncertainty stems from individuals and businesses delaying reporting some of their income in hopes of getting a tax cut later.

Knittel said that’s one of the things that contributed to last year’s low revenues.

In this year’s estimates, the IFO assumed the administration would pass its tax changes and people would file normally — leading to a moderate windfall for the commonwealth.

However, he said, “If they don’t [follow through on changing the tax code], it’s more uncertain regarding the income we think was shifted out of last year and when it would show up.”

“If tax reform is enacted and people know what the rules are,” he added, “we think the monies that were shifted out of last year will show up fairly quickly.”

The IFO is planning to release a revised revenue estimate later this month, based on actions taken by the federal government, as well as the state budget lawmakers passed late last month.