According to the latest data, sales tax collections in the Golden Triangle continue to exceed projections. That’s a good thing since the greater-than-anticipated revenue gives cities more flexibility in managing their finances.
The latest numbers show significant month-over-month and year-over-year increases in general sales, hotel and restaurant tax revenue in both Columbus and Starkville. West Point’s month-to-month collections declined slightly, but are still ahead of last year’s November numbers.
Although our cities did project increases in these revenues as part of their Fiscal Year 2023 budgets, Columbus, Starkville and West Point were appropriately conservative in their projections. As those collections continue to outpace those projections, the temptation to spend will only grow. City leaders hail the current number as a function of robust retail growth, increased tourism and pent-up demand created by the pandemic, but there is another factor that should not be ignored – inflation. When the cost of goods and services are inflated, those increases drive up tax collections and are not necessarily reflective of increased demand. In that respect, the inflation we are seeing is good for city finances in terms of revenues. Yet just like citizens, cities purchase goods and services, too, which means their cost increases even as revenues increase.
But how long these revenues will rise — or even if they will rise — is a matter of speculation, which is often a dangerous practice. As 20th-Century economist John Kenneth Galbraith once wryly observed, “The only function of economic forecasting is to make astrology look respectable.”
In our current situation, though, the person who holds the money spigot has been very clear on his intentions. In his effort to slow inflation, Federal Reserve chair Jerome Powell has overseen the largest interest rate increases in decades, making the cost of borrowing money more expensive and slowing the economy. Powell has acknowledged the rate increases could cause a recession and has indicated he is prepared for that.
Given the uncertainty of the economy in the coming months, we urge city leaders to be cautious in how they view the current tax receipts. The old saying, “Don’t count your chickens before they hatch” applies here.
While we understand the enthusiasm created by the latest revenue reports, it’s best to resist the urge to consider what we are seeing here as temporary and manage city finances that way.
There is no harm in being conservative in spending given the uncertainty of the economy.
The Dispatch Editorial Board is made up of publisher Peter Imes, columnist Slim Smith, managing editor Zack Plair and senior newsroom staff.
You can help your community
Quality, in-depth journalism is essential to a healthy community. The Dispatch brings you the most complete reporting and insightful commentary in the Golden Triangle, but we need your help to continue our efforts. In the past week, our reporters have posted 32 articles to cdispatch.com. Please consider subscribing to our website for only $2.30 per week to help support local journalism and our community.