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.
Patrick Walsh, CPA, MBA, is the managing partner and CEO of Withum, an advisory, tax and accounting firm with 2,200 team members across the U.S. and internationally. He served on the firm's management committee for six years, leading up to his role as managing partner. Walsh led the firm's national tax practice strategy for five years and oversaw the corporate tax services practice. He is also the executive sponsor for Withum's expansion overseas in opening and growing its India office. Walsh is actively involved in the firm's alliance with HLB International and is committed to leading an inclusive and diverse place of work as seen in his CEO Statement on Inclusion and Diversity.
Tim Stein is Senior Vice President of Human Capital at American Addiction Centers (AAC). His wealth of experience in training and development has greatly benefitted the entire company by fostering an engaged workforce dedicated to transforming the lives of those with addiction, a cause close to Stein as he is in recovery himself. As Senior Vice President of Human Capital, leadership, strategic vision and organizational change remain Stein's focus, as does the company's most important asset — the employees.
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.