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.
Mandated by the COVID-19 pandemic, remote work can also bring serious tax consequences.
Brad Coleman is the vice president controller of Marqeta. In this role, Brad is responsible for overseeing accounting, financial reporting and tax. He has over 25 years of experience in accounting policy, financial and regulatory reporting and internal controls. Before joining Marqeta, he served as principal accounting officer and Controller at LendingClub, vice president, finance at the Charles Schwab Corporation where he was responsible for technical accounting policy and financial reporting, and served as the Controller of the Charles Schwab Bank. Prior to Charles Schwab, Brad worked as a manager in the audit practice for KPMG, LLP in San Francisco, California and Sydney, Australia. Brad is a certified public accountant and holds a BS in business administration with a concentration in accounting from the University of San Francisco.
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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.