3rd Quarter 2008

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   The State general fund tax revenues decreased substantially in the second quarter of 2008 year-over-year for the first time since the third quarter of 2006.  1/  General Excise and Use Tax (GET) revenues, Net Individual Income Tax collections, Transient Accommodations Tax (TAT) collections, and Net Corporate Income Tax collections were all down for the quarter.
  
   For the second quarter of 2008, total tax collections distributed to the State general funds totaled $1,231.9 million, a decrease of $63.3 million or 4.9 percent over the second quarter of 2007 (Tables C-1 and C-2).  Following a 2.0 percent increase in the first quarter, the revenues for the first half of 2008 were down by 1.7 percent compared to the same period in 2007.  In 2007, State general fund tax revenues amounted to $4,683.1 million, an increase of $160.8 million or 3.6 percent over 2006.

   During the second quarter of 2008, GET revenues (excluding the Honolulu County Surcharge) totaled $641.1 million, a decrease of $20.9 million or 3.2 percent over the second quarter of 2007 (Tables C-1 and C-3). This was the first negative growth in GET revenues since the second quarter of 2002.  The 2.4 percent growth in the first quarter offset the loss to result in a modest decrease of 0.4 percent for the first half of the year.  In 2006 and 2007, GET revenues increased 8.6 percent and 6.8 percent, respectively, from the previous year.

   Compared to the second quarter of 2007, Net Individual Income Tax revenues decreased $29.5 million or 6.0 percent to $459.0 million in the second quarter of 2008 (Table C-4).  This decrease was largely due to a $29.8 million or 17.7 percent increase in Refunds (Table C-8), which is subtracted from the categories of individual income tax revenues. Payments with Returns (Table C-6) which is related to self-employment income increased $19.1 million or 16.8 percent.  However, this increase was offset by a $14.2 million or 6.6 percent decrease in Declaration of Estimated Taxes (Table C-5) and a $4.6 million or 1.4 percent decrease in Revenues from Withholding Tax on Wages (Table C-7).  In 2007, Net Individual Income Tax collections were almost the same as that in 2006 – increasing by 0.2 percent to $1,579.1 million.  The annual increases from 2004 to 2006 in the Net Individual Income Tax collections were 15.3 percent, 17.2 percent, and 8.9 percent, respectively.

   Net Corporate Income Tax revenues, which tend to be very volatile in nature, decreased slightly in the second quarter of 2008 compared to the second quarter of 2007 (Table C-9).  A $2.4 million or 5.2 percent decrease in Declaration of Estimated Taxes (Table C-10) was mostly offset by a $1.9 million or 16.0 percent decrease in Refunds in the quarter (Table C-12). Corporate Payments with Returns remained about the same during the quarter (Table C-11). In 2007, Net Corporate Income Tax revenues decreased $7.0 million or 8.0 percent from 2006.

   Reversing a positive trend that began in the fourth quarter of 2003, except the second quarter of 2007, Transient Accommodations Tax (TAT) revenues were also down $9.0 million or 14.0 percent in the second quarter of 2008 compared to the second quarter of 2007 (Table   C-13). In 2007, TAT collections grew $12.0 million or 5.4 percent from 2006.
  
   Compared to the first quarter of 2007, all major categories of the GET tax base decreased in the first quarter of 2008.  Retailing tax base decreased 2.1 percent or $139.2 million (Table C-14), the Contracting tax base decreased 5.3 percent or $105.9 million (Table C-16), the Hotel Rentals tax base decreased 2.2 percent (Table C-17). Only the Services tax base remained about the same (Table C-15).
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   1/ When interpreting tax figures in conjunction with other quarterly data in this report, it should be kept in mind that the tax data represent collections during the quarter.  The transactions on which the taxes were paid did not necessarily take place during the quarter.