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.
Max Effing is part of the global insurance practice at Simon-Kucher & Partners. He focuses on price/product design, salesforce effectiveness and digital sales processes. Within the scope of his projects he works primarily on the optimization of insurance portfolios, and modeling of innovative sales processes with a strong emphasis on value delivery, customer engagement, behavioral pricing and needs-based selling. Max pursued his studies in International Business at Maastricht University, the Netherlands. He holds a master degree in finance and marketing.
Roland Cloutier is senior vice president and chief security officer at ADP. He is responsible for cyber, information protection, risk, workforce protection, crisis management, and investigative security operations for ADP. With over 25 years of experience in the military, law enforcement, and commercial sector, he is an expert in corporate and enterprise security, cyber-defense programs, and business operations protection. Prior to ADP, he served as CSO of EMC, was a U.S. Air Force combat security specialist, and an aerospace protection and anti-terrorism Specialist for the Department of Defense. Roland has been honored with numerous industry recognitions, most recently the 2018 ISE Luminary Leadership Award. He is also the author of, “Becoming a Global Chief Security Executive Officer” where he shares his expertise on how to effectively plan for the future demands of leadership in global security.
Mike Hileman is sr. business development manager at Auto Insurance Specialists (AIS Insurance), a Mercury Casualty subsidiary.
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.