I don't buy it. If retail sales were back to within 4.3% of the pre-recession peak, sales tax collections would be back towards the pre-recession peak, if not exceeding the pre-recession peak.But...
Why might they exceed the peak? Because of numerous state sales tax hikes.
In spite of numerous sales tax hikes, tax collections are still 5.9% lower than two years ago. Moreover, June of 2008 was not the pre-recession peak. November of 2007 was the pre-recession peak.The conclusion?
Retail sales are down 10% or more from the pre-recession peak, especially if one factors in tax hikes.
Many states look at the Census report trying to figure out why their sales are lagging the national averages. The problem is the Census Bureau national averages are a blatant distortion of reality. The key to the states' conundrum is Census Bureau sampling methodology does not take into consideration stores that have gone out of business. Sales tax collections obviously do. Closed stores make no sales and collect no taxes.In other words, same store sales are up because the overall number of stores has declined more than the level of overall sales (a smaller pie, but larger slices). The thought is the Census is then extrapolating those higher same stores figures to a base that is no longer there.
My sanity check on his hypothesis is to compare the decline in retail sales relative to business, manufacturer, and wholesale sales (under the assumption that retail stores have closed at a faster pace / are more numerous and harder to track than businesses, manufacturers, and wholesalers).
While there could be alternative reasons (i.e. price levels, type of sale, etc...), it will be worth following this to see if he may be on to something...
It looks like my "smell test" may have holes. Mish reached out and noted retail sales peaked in November 2007. In looking at the data since that peak, a different trend can be seen:
In a nutshell, it appears retail sales slipped first, then sales of business, manufacturing, and wholesale followed (thinking these sales "react" to the end consumer). More recently, it looks like retail sales have rebounded first and again, have been followed by business, manufacturing, and wholesale.
So what may cause the discrepency between retails sales and tax collections? Back to Mish:
1. Sales Tax holidays
2. Online sales
3. Government purchases