U.S. states saw their tax revenue drop by about $31 billion, or 6 percent, from March through August, compared to the same period a year earlier, as the pandemic triggered economic shutdowns across the country, according to data from 44 states compiled by the Urban Institute.
The scale of the drop appears smaller than expected, relative to the depth of the economic contraction, and comes after several states have reported that their revenue didn’t decline as much as anticipated despite business shutdowns and increased unemployment. In August, when much of the country was reopening, state revenue climbed about 1.1 percent from a year earlier, the Urban Institute found.
Mark Rems is a principal and national leader of the KPMG Indirect Tax Technology practice. Based in Philadelphia, he has roughly 25 years of tax and technology experience helping clients improve their indirect tax function. He has led large global tax engine implementation projects for a variety of ERP systems including SAP, Oracle, and MS Dynamics. He also has extensive experience in programming and application development which includes developing custom integrations and standalone programs to assist clients with their indirect tax calculation and reporting processes. He has deep sales and use tax compliance experience and has helped clients centralize and automate their monthly compliance function. He has direct experience working in a number of niche tax technical areas such as motor fuels, excise taxes, telecom taxes and lease taxes.
Amit Ringshia is a principal in KPMG's New York Ignition office. He focuses on the design and delivery of technology solutions and has more than 16 years of experience delivering tax technology driven transformations. He is focused on innovating solutions in areas of tax data management, tax process automation and integration, tax analytics, digital labor and tax department collaboration. He is responsible for assisting in technical aspects of projects including solution design, development, infrastructure, governance models, management and migration. He has architected solutions that integrate multiple tax technologies with company technologies to optimize efficiencies for an effective tax function. He leads teams with experience in software development and tax domain. He supports engagements by leveraging his technology and tax experience with project execution and delivery expertise. He has assisted engagement teams and their clients to enhance the utilization of technology in data collection, processing, analysis and reporting. In addition, he has delivered tax technology solutions that span the breath of tax department functions such as planning, compliance, transfer pricing, audits and provisioning for both direct and indirect tax functions. He is an active member of various tax and technology groups in New York City and is a regular speaker at various tax and technology conferences. He also organizes innovative technology sessions and trainings for tax professionals.
Greg Ryan is a Bloomberg News reporter in Boston covering the economy and politics of Massachusetts.
The tax figures come as Republicans in Washington balk at extending aid to states and cities to help cover budget deficits that are expected to continue as the coronavirus weighs on the economy. Experts say that states’ financial outlooks could worsen as the effects of the stimulus bill fade and high unemployment reduces tax bills next year.
The August increase should be viewed with caution since income-tax deadlines were pushed back to July, which could have resulted in some revenue being processed later, according to Lucy Dadayan, senior research associate with the Urban-Brookings Tax Policy Center at the Urban Institute. Personal income-tax collections, which rose 3.8 percent in August, were in some cases supported by backlogged unemployment insurance benefits subject to withholding tax, Dadayan said.
Between March and August, tax revenues fell 6.4 percent year over year, with 36 states reporting declines over that period, the report said. Between March and August, eight states, including Washington and Georgia, reported growth in tax revenue.
“Due to the shifting in timing of tax receipts this past year, it is crucial to view August year-over-year revenue gains and fiscal year to date data with caution,” Dadayan said in the report.