State Tax Collections Continue to Tumble
The Nelson A. Rockefeller Institute of Government released a report last month that shed some light on the continuing troubles that states are having when it comes to the collection of much-needed tax revenues.
According to the report, overall state tax revenues dropped 10.7% in Q3 '09 compared to the same quarter a year earlier. This decrease was led by personal income tax revenues which dropped a total of 11.4% compared to Q3 '08. Personal income tax revenues made up an estimated 40% of all of the state tax revenues that were collected in Q3.
Sales tax collections dropped by 8.2%, while corporate tax collections fell by a whopping 19.4%.
The report stated that a total of 44 early reporting states experienced a decline in tax revenues, with more weakness expected in Q4 '09.
Of the states that reported their data, none saw an increase in personal income tax revenues in Q3 '09 compared to the same quarter a year earlier.
The state with the biggest percentage decline in personal income tax revenues was Alabama, which experienced a precipitous drop of over 26%.
A handful of states saw their corporate income tax revenues increase from a year earlier. They were:
Vermont + 3.3%
South Carolina +17.4%
Tennessee + 8.2%
Only one state reported an increase in sales tax revenues, and that was Maine, with an increase of 2.5%. The hardest hit state in this category was Utah, which experienced a drop of 23%.
It's no wonder that many states have been struggling mightily to balance their budgets over the past few years, given the shocking drop in tax revenues since the start of the recession in late 2007.
The spike in the national unemployment rate has played havoc with personal income tax and sales tax revenues, while the drop in economic activity has hammered corporate tax revenues. In addition, property tax revenues have also decreased due to the popping of the real estate bubble, but they do seem to be rebounding.
It will be interesting to see how state tax revenues hold up in 2010..
Source: Rockinst.org - Tax Collections Continue to Tumble
Filed under: The Economic Meltdown