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.
Kedar Kamalapurkar is Managing director and a leader in the insurance sector claims practice at Deloitte Consulting LLP. He has nearly 15 years of experience in claims operations, including as a claims adjuster. He has led claims transformations from strategy to execution for many of the major insurance carriers in the United States and Europe. Kedar also holds insurance industry professional designations from CPCU, AIC, API, and AINS.
Michael Cline is Managing Director and Insurance Sector Claims Leader at Deloitte Consulting LLP. He has over 28 years of experience in claims operations and technology at insurance companies and the consulting field. He also has insurance industry professional designations from the Insurance Institute of America; CPCU, AIC, API, AIS and AINS. Michael holds an insurance property & casualty adjusters license in the State of Nevada and is an active member of the Insurance Institutes National Claims Interest Group committee.
Timothy Ewell is Chief Assistant County Administrator of Contra Costa County, California and Chair of the GFOA Committee on Governmental Debt Management.
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.