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.
Siddhartha Jha is the Founder, Chairman, and CEO of Arbol, an insurtech and global climate risk solutions platform. Sid is also a co-founder of dClimate, the first decentralized climate information ecosystem. Before Arbol and dClimate, he had over 13 years of experience in the financial industry, covering interest rates and commodities in quantitative research and trading roles. He launched an agriculture futures trading portfolio, managing over $100 million at a major commodity trading firm. He was the first analyst at a startup commodity hedge fund, which grew to manage over $600 million in assets. He was previously a Vice President of Interest Rates Strategy at J.P. Morgan.
Sid authored the well-received book "Interest Rate Markets," published in both English and Mandarin. He has taught financial markets at NYU and was on the board of a non-profit working with inner-city youth. Sid graduated from Harvard University with a B.A. Cum Laude in Applied Mathematics and M.A. in Statistics as part of a 4-year combined degree program.
Jason Ewas is a policy manager at the Aspen Institute's Financial Security Program.
Chip Castille is the founder and CEO of Lasso, a financial advice and wealth app. Previously, he was managing director and Global Retirement Strategist for BlackRock, where he was responsible for the development, product management and distribution of BlackRock's U.S. retirement strategies and services.
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.