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.
Bill Gimbel is president of LaSalle Benefits, a technology-enabled corporate benefits firm.
As the Americas Insurance Sector Leader for EY’s Strategy and Transactions, Martin advises clients on all issues relating to organic growth strategy and inorganic acquisitions and divestitures. He also has deep experience in organizational structuring and operational integration and separation.
Martin holds an MBA from INSEAD and an MSc in Computer Science from Twente University, The Netherlands.
Geoffrey has over 23 years’ experience serving a mix of entrepreneurial and global clients across multiple subsectors in financial services. He has worked on over 300 transactions advising both corporate and private equity clients in multiple types of transactions, including banking, asset management, FinTech and insurance. Geoffrey is a CPA actively licensed in New York and North Carolina.
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.