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Amid sluggish sales-tax collections, Md. shifts revenue projections downward

Maryland’s lower-than-expected sales-tax revenue suggests consumers have reined in their discretionary spending. (Jason Alden/Bloomberg)

Maryland’s Board of Revenue Estimates on Wednesday projected that less money than expected would flow into the state’s coffers in 2016 and 2017, largely because of weak sales during the holiday shopping season and in the month of January.

The board said general-fund revenues probably would be $51.4 million lower than estimated in December, when officials announced the state was on track to collect $33.5 billion over the two-year period.

The difference is relatively small in the context of Republican Gov. Larry Hogan’s proposed $17 billion general-fund budget for fiscal 2017. But Comptroller Peter Franchot (D), one of three members of the board, cautioned against drastic spending increases in light of the new figures.

“Clearly we shouldn’t make spending plans that include revenues we know have a strong chance of never showing up,” Franchot said. “And we shouldn’t make wishful assumptions that sales-tax revenue will increase.”

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The board revised its estimates for sales-tax collections downward by a combined $127 million for 2016 and 2017. The new projections suggest consumers are reining in their discretionary spending.

Franchot attributed the sales-tax sluggishness to lackluster growth in wages and higher-paying jobs, along with an unemployment rate that, at 5 percent in December, remains high by Maryland standards.

“Without a doubt, this continues to be the slowest and most tepid economic recovery of our lifetimes,” Franchot said. “I believe the most prudent path is to accept these economic conditions as our ‘new normal.’ ”

The board revised its December numbers for lottery sales, estate-tax revenue and corporate income-tax collections upward by a combined $9.2 million, softening the blow from its lower sales-tax estimates.

It said the large Powerball jackpot earlier this year contributed to higher lottery sales; the jump in estate-tax revenue was due to a higher-than-usual number of deaths of wealthy individuals; and dispute resolutions raised the amount of corporate income taxes collected.

Wednesday’s estimates came as the Senate Budget and Taxation Committee works to finalize its recommendations on Hogan’s 2017 budget.