UM’s Barkey Talks Inflation, Demand and $2B Income Tax Receipts
At the end of May, the Montana Department of Revenue reported that state income tax collections topped over $2 billion, a number that caused Patrick Barkey, Director of the University of Montana Bureau of Business and Economic Research, to emphasize on Thursday’s KGVO Talk Back show.
"For the second straight year, the state of Montana has hit a home run with respect to tax collections,” said Barkey. “This last fiscal year is almost done. I think today is the last day of the fiscal year and it's been 11 months through, income tax revenues, corporate tax revenues, even property tax revenues, all these revenue sources are screaming high. And it's after a second year, so it's a big year that's occurring because the economy is doing really well.”
Regarding the cause of inflation throughout the country, Barkey said the massive government spending through the pandemic had contributed greatly to the inflation rate.
“I have a slide I've been doing in my programs, where I compare the amount of government stimulus put into the economy versus what we what I call the output gap,” he said. “In other words, the gap between what the economy is actually producing and what it could produce and that gap grows. When you have a recession, the economy tumbles, you have this gap, and then you have stimulus.”
Barkey said the key statistic regarding inflation is consumer demand.
“The thing that's missed in that story is how much stronger demand is today than it was even pre-pandemic,” he said. “I mean, when you look at the amount of money in the economy and the amount of demand; when you look at, for example, things like retail sales, accommodations, and food services, these things have bounced back so strongly that even in an economy that didn't have COVID, even in the economy didn't have wars and so forth, then people would be hard-pressed to meet that demand.”
Barkey said the University of Montana Bureau of Business and Economic Research will be conducting the next economic seminar in August.
“Our mid-year economic update is an attempt to reassess what was actually a very optimistic forecast we made for Montana,” he said. “It'll be held August 2 through August 5 meeting either for breakfast or lunch. There are short presentations and we're going to emphasize the supply chain issues and ask the question which many businesses and consumers are asking is ‘for how much longer are these going to go on’? Are they going to get worse because they have really upset our lives?”
Click here for access to the University of Montana Bureau of Business and Economic Research and the seminar.