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.
Mary Ellen Iskenderian is president and CEO of Women's World Banking, the global nonprofit devoted to giving low-income women in the developing world access to the financial tools and resources they require to achieve security and prosperity. She is also the president and CEO of Women's World Banking Asset Management, which invests in growing businesses with innovative solutions that enable women to achieve economic empowerment.
Natalie Pierce is the chair of the employment & labor practice, at Gunderson Dettmer
Nilesh Vaidya is executive vice president and global head of banking and capital markets at Capgemini.
He has been with Capgemini for more than 20 years and is an expert in managing digital journeys for clients in the areas of core banking transformation, payments and wealth management. He works with clients to help them launch new banking products with their underlying technology.
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.