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.
Eileen O. Pincay, R.Ph., is vice president and national pharmacy practice leader at Segal.
Jonathan Boylan is a 30-year veteran of insurance and financial technology. He is the Chief Technology Officer of FINEOS, a leading provider of Life, Accident and Health insurance solutions to over 60 insurers in North America, EMEA and APAC. In the last 20 years, Jonathan has played a leading role company's growth from a startup to becoming a publicly traded company with over €120m in annual revenue. While leading technology throughout the period, Jonathan took on additional responsibilities to support growth including establishing product management and leading marketing. As such, Jonathan has spent much of his time supporting the acquisition of new customers in new and existing markets, both directly in the sales process and in broader thought leadership. More recently, he worked to select acquisition targets which led to the successful acquisition of Limelight Health and Spraoi by FINEOS. In his spare time Jonathan has volunteered his time to support the Irish Software Association, Tech Ireland, Alexandra College and SciFest.
Tim Urbanowicz, CFA, is the head of research and investment strategy for Innovator Capital Management.
Prior to joining Innovator, he was a senior investment strategist for Northern Trust, serving as a subject matter expert on global markets and portfolio construction. Prior to joining Northern Trust, he served as the director of fixed income ETFs and head capital markets strategist for Invesco.
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.