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.
The funds will be in addition to the $160 million from the Emergency Reserve Fund that the board released March 12.
Tim Ryan is U.S. chair and senior partner of PwC. Previously, he served as vice chair responsible for the firm’s strategy and stakeholder relationships including investor relations, regulatory affairs, public policy, corporate responsibility and human capital. With nearly three decades of diversified experience serving clients in the financial services industry in the U.S. and internationally, he also previously led PwC's Assurance practice and before that, led PwC's U.S. Financial Services practice and PwC's Consumer Finance Group. In 2017, he worked with a group of CEOs to launch The CEO Action for Diversity & Inclusion — the largest ever CEO-driven business commitment to advance diversity and inclusion in the workplace.
We've had many chances to learn, from the dot-com bust to the 2008 financial crisis. But the storm is perhaps most applicable to our current situation.
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.