2010 Archives

Now what about Dallas' sales tax forecast?

So glad you asked.


The following is from the July 22, 2010, edition of The Dallas Morning News. Michael Davis, an economics professor in SMU's Cox School of Business, provided expertise for this story.

July 27, 2010

The Dallas Morning News

The monthly roller coaster ride of sales tax receipts has been no fun for the city of Dallas over the last two years.

For the most part, it's been that sickening, where's-my-stomach feeling, as receipts kept dropping and dropping.

In the 2007-08 fiscal year, total sales tax receipts for the city nearly hit $230 million. This year, they're projected to be about $202 million, something that, along with precipitous drops in property values, explains why Dallas' budget troubles are so serious. . .

Sales tax makes up 21 percent of the city's annual revenue. Property tax accounts for 42 percent, and an assortment of fees, fines and other income rounds out City Hall's income.

But predicting sales tax receipts far into the future is a tricky business at best, even if it is necessary to build a budget.

"It probably is the hardest piece to forecast. Part of the problem with sales tax is you are not just making a judgment about the patterns of the larger economy, you are making a guess about the microstructure of retailing," said Michael Davis, professor of economics at Southern Methodist University's Cox School of Business.

The month-to-month reports that are presented to the City Council may be encouraging or discouraging based on what figures come in. But they don't mean very much individually, Davis said.

"When you are pinpointing a particular month in a particular area, there is way too much volatility there to make sense of it. Something as seemingly random as whether the month has four Saturdays or five Saturdays is going to make a huge difference," Davis said. 

Read the full story.

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