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.
Project Manager, Vaco
Gregory D. Squires is a research professor and professor emeritus in the sociology department at George Washington University. He is also a member of the Philadelphia Home Appraisal Bias Task Force.
Brian Swanson is a partner at Flashpoint Marketing, a marketing consulting firm that focuses on providing traditional and digital lead generation services exclusively to the accounting profession. In 2008 he joined Flashpoint to lead the development of the firm's digital services practice. Prior to joining Flashpoint, Swanson worked for a Big Four firm assisting with audit practice marketing and development. He has also worked as the director of marketing & business development for a regional accounting firm in the Southeast United States. In 2009 he earned his Master in Business Administration in Finance from Benedictine University. He also holds a Bachelor of Arts in Secondary Education from Northeastern Illinois University. He was the first accounting marketing professional to earn certification from the Search Engine Marketing Professionals Organization in internet marketing and advanced search engine optimization. He is currently a member of the Association of Accounting Marketing and SEMPO.
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.