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.
Jeff Wilcoxon is the Senior Strategy and Corporate Development Principal for VIU by HUB. He drives broader enterprise-level strategic partnerships for VIU, helps source and drive acquisition prospects that align with the VIU strategy, and develops strategies that help further position VIU to enhance its value proposition as a modern digital broker.
Prior to VIU by HUB, Jeff held leadership roles in corporate strategy and strategic partnerships at Nationwide Insurance. Other experience includes leading global consumer insights on the connected car strategy team at General Motors, strategy and operations consulting at Accenture, and various other roles in banking and consulting. Jeff is also an entrepreneur and co-owner of a fifth-generation family ice cream business where he assists with strategy, marketing, and financial planning in his spare time.
Pavlo Boyko is accounting and tax solutions architect at TMF Group.
Bob Fraser is the co-founder, CFO and chief macro strategist at Aspen Funds. An author, entrepreneur and podcast host, he is passionate about expanding access to institutional-caliber opportunities traditionally reserved for family offices and ultrawealthy investors.
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.