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.
Brian Uhlig is a senior partner of employee benefits at Alera Group, a leading independent, national insurance and financial services firm created through the merger of like- minded, high- performing, entrepreneurial firms across the United States. It is the 7th largest privately held employee benefits company in the nation and was founded in 2017.
Bernhard is a principal in EY’s Financial Services Office and is the Global Leader of EY’s Customer and Growth Solution for the insurance industry. This practice assists insurance carriers world-wide in transforming their sales, service and marketing operations. Previously, Bernhard was Chief Marketing Officer for a $100B division of a global financial institution, and oversaw commercial initiatives across 31 countries. For 25 years, Bernhard has led analytics and customer driven transformation programs in the financial services industry, delivering results in terms of customer acquisition, retention, product cross-sales and the efficacy of sales, service and marketing. Typical programs include digital channels, customer experience improvement and adopting distribution management and CRM practices and technologies. Bernhard holds an MBA from Wharton and a MS Finance from Erasmus University.
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.