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.
Nadia van de Walle is the head of banking inclusion at Wells Fargo.
Taylor C. Nelms is vice president of research and insights at the Financial Health Network.
Mike DePrisco is president and CEO of the Institute of Management Accountants. Since joining the IMA in April 2023, DePrisco has led the development and implementation of a new vision and strategy designed to broaden the organization's relevance and reach, enhance member experiences, and strengthen IMA's role as a catalyst for professional growth and leadership. Prior to the IMA, DePrisco spent a decade at the Project Management Institute where he served as chief operating officer and interim president and CEO. DePrisco serves on the AAA Foundation Board and is co-chair of the Future Accountant Stakeholder Organization. He is also a member of the CEO Update executive roundtable program, advocating for the future of accounting and management professions. His leadership has been recognized through inclusion on Accounting Today's Top 100 Most Influential People in Accounting and NJBIZ's Power 50 in Accounting lists.
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.