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.
Megan Ryan is a payments professional specializing in digital innovations and emerging technologies. For five years, until 2026, she worked for the Federal Reserve Bank of Chicago as a payments policy specialist. At the Federal Reserve she focused on examining how technological advancements are reshaping the way individuals and businesses move money, with attention to the policy implications of these innovations. Her publications have covered the evolution of cryptocurrency and stablecoins, the impact of quantum computing on payments, offline digital payment capabilities, digital identity feasibility, and financial inclusion. She is passionate about understanding the gap between technological possibility and practical implementation, ensuring that payment innovation serves the broader goals of efficiency, security, and accessibility of the financial system. She has a Masters in public policy from Northwestern University and a Bachelors in Marine and Conservation Biology from Seattle University.
Travis Hoffman is a vice president and account executive in B. F. Saul Insurance's commercial lines practice. With over 18 years of experience designing insurance programs for complex commercial needs, he specializes in real estate, contractor risk, and multifaceted coverage analysis.
Jennifer Neal is a vice president and account executive in B. F. Saul Insurance's commercial lines practice. With over two decades of experience in the industry, Jennifer oversees and manages the commercial book of business and assists with agency policies and procedures.
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.