Sales tax collections dropped again last month as Georgia continues to feel the impact of sluggishness in some sectors of the economy, including housing.

Sales tax collections were down 9.9 percent in October over October 2006, a drop of about $45 million. While at least part of the drop is pegged to accounting changes, the trend has been unsettling, said Kenneth Heaghney, the state's fiscal economist.

"Clearly this is not a real positive signal at the moment," he said. "Almost all states are seeing a similar slowdown in state tax collections. The data seems to show that this is a common issue."

The weakest pieces of the puzzle are connected to auto sales or housing, where revenues from taxes on materials and furnishings are down.

With the housing market in a tailspin, the number of sales is declining and, in many cases, their value is also shrinking, said Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University. "The moderation in tax collection is because housing is really slowing. When we don't build homes, the sales tax is not collected on materials."

Moreover, the "wealth effect" that gives homeowners confidence to spend when their home values are booming also works in reverse, he said.

For the fiscal year that began July 1, total collections —- including sales, fuel, tobacco and other taxes —- are up 4.2 percent, or $227 million.

That's higher than what's needed to meet the state's $20.2 billion budget for fiscal 2008 if the revenue does not fall further.

However, collections have slowed the past few months: Collections from all types of taxes last month were just 2 percent higher than during October 2006.

"Growth of 2 percent for a year is certainly softer than anyone has been looking for," said economist Roger Tutterow of Mercer University. "Hopefully we'll see it rebound, but you'll have to assume that it is going to be significantly lower than what we've had the last few years."

That link between the sales tax and the ebb and flow of the economy may soon be fodder in the coming debate about changes in the state's tax structure. Some proposals call for greater reliance on the sales tax, which is suddenly proving volatile.

October's disappointing data adds to the unfortunate momentum, coming after a tough September. That month's sales tax collections dropped $47.6 million, or more than 10 percent, from September 2006.

Overall uncertainty about revenues could also cloud any new programs proposed during the legislative session in January.

But some strength remains in the revenue picture.

Income tax revenues —- the biggest single component of state revenue —- came in a healthy 7.5 percent above last October. But even that flow was decelerating slightly: in the fiscal year to date, income tax revenue was up 5.5 percent.

With inflation taking a bite out of any growth, economists say overall tax revenues need to expand at 7 or 8 percent a year to give the state the cushion it needs.

Even with a decent pick-up, that seems out of reach, Tutterow said. "I think you'll have to assume that this is going to grow at 5 or 5.5 percent, which is significantly lower than what we've had."