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.
David M. Toll is the publisher and editor of the weekly newsletter Private Equity Career News.
Michelle Krause is a senior managing director of Accenture and leader of the firm’s North America Insurance Client Service Group. She is responsible for helping insurers develop, manage and deploy large scale technology systems, business processes and strategies. In her career with Accenture, which spans almost 20 years, Krause has worked with many of the top insurance carriers in the industry, assisting them in their efforts to become high-performance businesses. Her expertise lies in insurance processes, product and policy management, claims management and underwriting, focused primarily on the areas of financial services insurance, and property and casualty insurance. As Client Service Group leader, Krause and her teams develop strategies to help insurers address capacity and infrastructure constraints, streamline and standardize processes, and develop custom-built policy administration platforms.
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.