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.
Dan Davis serves as Director, IoT and Emerging Markets for Insurance. Dan has been with LexisNexis Risk Solutions since 2016, where he leads the creation of the value proposition, strategy and positioning for the LexisNexis IoT platform across Life, Home and Commercial. His insurance experience includes leadership roles in claims, business development and strategic technology initiatives in the P&C market. Dan has also served LexisNexis through strategic partnership management in the emerging markets and software platform space. Dan has a bachelor’s degree in Business from Louisiana State University.
David Fanger is a senior vice president in the financial institutions group at Moody's Investors Service.
Quyen Truong is a partner at Stroock & Stroock & Lavan LLP, with decades of expertise in consumer protection, privacy and digital innovation. She's previously held senior roles at the CFPB (assistant director and deputy general counsel), the FDIC, a deputy at the FSOC and a FCC's associate bureau chief. Truong helps organizations confronting a rapidly evolving environment interpret, influence and comply with the law, through all phases of federal and state regulation, supervision and enforcement.
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.