The revenue collected from Michigan’s General Fund and School Aid Fund earmarked taxes totaled $1.3 billion in May, which was down 13.4% from last year’s level. This marked the fourth consecutive month that tax collections have declined in excess of 10.0%. While collections for almost all of the major taxes experienced declines in May from their year-ago levels, the most significant declines were experienced by the sales, use, and income taxes. Compared with the Senate Fiscal Agency’s monthly breakdown of the revised consensus estimates for FY 2008-09, May collections fell below the monthly estimate by $62.0 million and this shortfall was due primarily to weaker-than-expected sales and use tax collections.
When the Senate Fiscal Agency met in mid-May, they estimated the revenues for the remainder of the fiscal year. Despite the fact that they updated their estimates at that time, actual revenues for May declined by $62 million. In other words, in the matter of a few weeks, their estimates were already off. The budget is deteriorating that quickly.
Sales tax revenue totaled $406.6 million in May, which was down a sharp 22.2% from the year-ago level. A consistent historical monthly series for the sales tax is available back to FY 1984-85 and the decline in May marks the largest percentage decline in monthly sales tax collections during this 24-year period.
. . .
Tobacco tax revenue totaled $84.0 million in May, which was down 5.9% from last year’s level. Most of this decline is likely due to the large increase in the Federal tobacco tax that went into effect on April 1. The Federal tax increase is having a negative impact on Michigan’s $2-per-pack cigarette tax because it boosted the price of cigarettes and therefore is having a negative impact on cigarette sales and Michigan’s tax receipts.
That last quote is vitally important. It perfectly exemplifies the power of taxation. It's common sense, but the politicians in Lansing don't seem to get it. The more you tax something, the less of that "something" you're going to get. Clearly, the more cigarettes are taxed, the fewer cigarettes that will be sold. The same goes for businesses. The more you tax businesses, the fewer businesses there will be, and hence the fewer jobs there will be. Gosh, it's pretty simple, but our tax-hiking pals in Lansing and elsewhere don't seem to get it.
Finally, the $406 million of sales tax revenue in May was the lowest monthly level of sales tax collection I could find, going back at least until 2005. Michigan is hurting, folks, and it's only going to get worse, as exemplified by the state's skyrocketing 14.1% unemployment rate.
Read a little about how California's government is collapsing because of that state's inability to enact any rational level of reform: California Collapsing.