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.
Charles Hylan, CPA, MBA, is the managing director at The Growth Partnership, where he advises clients within several areas of TGP’s service offerings, including marketing, strategic planning, partner relationships and leadership development. Additionally, he is a senior business developer at ABLE: CRM for CPAs and leads efforts to bring the Rosenburg survey, a benchmark report comparing over 100 metrics across nearly 400 firms to the accounting marketplace. He has experience consulting and working with accounting firms ranging from sole practitioners to national and Big Five firms.
Louisa Harbage-Edell is the director of market intelligence and strategy for Arity. She has spent her entire career in the insurance industry and most of that surrounded by telematics, first as an actuarial analyst at Progressive Insurance, before transitioning to business consulting, where she spent over a decade helping to build initial demand for telematics programs across the insurance industry, including launching the precursor product to DriveAbility.
Megan Klein is the Actuarial and Rating Services Director at Arity. Her team is responsible for the actuarial support of Arity’s telematics models, enabling insurance companies to execute on their goals around telematics. Leveraging over a decade of P&C insurance product and pricing experience, Megan ensures telematics risk models are actuarially sound, consumable by users, and supportable with regulators. Megan received her bachelor’s degree in Mathematics: Statistics and Actuarial Science from the University of Northern Iowa. She is a Fellow of the Casualty Actuarial Society.
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.