Falling Tax Revenues Will Lead to Increased Taxes
In news that should be a surprise to absolutely no one, the Nelson A. Rockefeller Institute of Government reported that state tax revenues fell by a whopping 12.6% in Q1 2009.
The Institute reported that the bulk of the decline was due to a drop in personal income tax revenues, which dropped nearly 16% YoY (year-over-year). The Institute reported that this was the largest decline in personal income tax revenues since 2002, which is when the last recession took place.
The report broke overall tax revenues down into three major categories: personal income tax, corporate income tax and sales tax.
Personal income tax revenues, as mentioned, fell 15.8% in Q1 2009 (based on preliminary data). Corporate tax revenues dropped 16.2%, while sales tax revenues fell 7.6%. This is based on data from 47 early-reporting states, according to the Institute.
The hardest hit region of the United States was the Far West, which saw an overall tax revenue decline of 18.1% in Q1 2009. Personal income tax revenues dropped by an alarming 23.2% compared to last year, which further illustrates one of the major problems that is currently facing the state of California. A deep decline in revenues has made it nearly impossible for the state to balance their budget.
South Carolina posted a 38.3% decline in personal income tax revenues in the quarter. Alaska posted an 83.1% decline in corporate income tax revenues in Q1 due to the drop-off in commodity prices, while Arizona posted a 16.2% decline in sales tax revenues.
It should be noted that the Institute did not have data for Montana, Nevada and New Mexico, so they weren't included in this report.
It's not hard to see what is going on here.
Higher unemployment rates have led to a precipitous decline in personal income tax revenues.
A challenging business and economic environment has led to a large-scale decline in corporate tax revenues.
A hesitant and suddenly frugal American consumer has led to a decline in sales tax revenues.
So what's the end result of plummeting tax revenues?
Increased taxes. Get ready to pay.
Source: State Tax Collections Across U.S. Plummeted in First Quarter
Filed under: General Knowledge