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- February local option sales tax distribution is down 2.5 percent from last year
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RECESSION HAS HIT HARD • Nephi had a 2.5% decrease in February and a 20% decrease in sales tax receipts from 2008 figures city council hears. On the positive side, it is becoming more and more apparent that the recession is now over and the bottom came during the late spring or early summer of 2009. Welcome news to our area.
By Myrna Trauntvein
Times-News Correspondent
The February local option sales tax distribution is down 2.5 percent from last year and that level was down from 2008.
While the numbers are reported in February, the percentages are actually for December’s monthly sales.
Randy McKnight, city administrator, reviewed the findings of the League of Cities and Towns as reported their March 2010 newsletter in an article entitled: “The Long Road Back to Flat.”
“Blair Painter’s analysis of Nephi’s sales tax is that it is down about 10 percent when compared with the same time last year,” said McKnight. “And that was down from the year before.”
In all, he said, sales tax receipts were down 20 percent from two years ago.
On the positive side, it is becoming more and more apparent that the recession is now over and the bottom came during the late spring or early summer of 2009.
“However, sales tax revenue is still in decline compared to last year,” read McKnight. “And, keep in mind that last year was well below the previous year.”
In real dollars, February’s distribution has dropped over 20 percent from 2007. Slowly consumer purchases are increasing leading us back to a level o flat sales tax distribution.
“It is still long road to get back to flat however, sales tax revenue for Utah’s cities and towns has been lower than the previous year in 21 of the last 22 months,” he said.
The question is, what can be expected in the next four months?
The economic recovery is sending mixed signals. The concern of the nation’s consumers is that unemployment make take months or years to recover. There may be no job growth until that occurs.
January’s retail sales increased by .05 percent from December and is up 4.7 percent over January of last year.
In January, consumers purchased more electronics and appliances which may have been purchases that had been postponed for months. Those sales may represent good news for Marc;h sales tax revenue.
Consumer sentiment edged down in February even though the trend had been upward for the past 12 months.
“When we are planning our budget,” said McKnight, “we will need to take these concerns into consideration.’
Consumer spending is the largest driver of the U.S. economy, generating approximately 70 percent of the U.S. Gross Domestic Product (GDP). Since consumers play such a critical role in the economy, economist at the University of Michigan have surveyed American households with respect to their propensity to buy appliances and automobiles in the future.
The surveys are conducted each month and each tracks a different aspect of consumer attitudes. They are designed to be statistically representative of all U.S. households excluding Alaska and Hawaii.
Interviews are conducted via telephone and 500 interviews are performed.
Consumer sentiment improved rapidly in early 2009 jumping from 5e6 in February to 73 in September but the confidence has slowed recently. There seems to be widespread recognition that job and income prospects will remain grim throughout the year to come.
“Some modest improvements have been forecast over the next year,” said McKnight. “But, remember, this is someone else’s crystal ball.”
The current recession has been historic, both in its depth and length.
Nevertheless, there have been other hard times and there have been lessons learned.
Essentially what has been learned in the past is that budget remedies fall into three categories, primary treatments, treatments to use with caution and treatments to use with extreme caution.
“If we look at it from a fiscal perspective of 2009,” said Mark Jones, mayor, “we can see the picture.”
February’s sales tax generated around $10.78 in revenue per Utahn, this amount is much lower than the levels experienced a couple of years ago and is a significant drop from the high $14 to $15 per capita amount for most of the past decade.
The best way to understand the U.S. economy is by looking at Gross Domestic Product (GDP), which is the statistic used to measure the economy. In other words, the U.S. economy, as measured by GDP, is everything produced by all the people and all the companies in the U.S.
To make sure that GDP can be most accurately compared year-to-year, the Bureau of Economic Analysis (BEA) usually reports real GDP.
The total market value of all final goods and services produced in a country in a given year, equal to total consumer, investment and government spending, plus the value of exports, minus the value of imports.
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