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Data Alert 

June 5, 2013

For Immediate Release

Media contact:
Robert Bullock (518) 443-5837

email: rbullock@albany.edu
 

Strong Growth in Personal Income Tax Collections in First Quarter of 2013 but Cloudy Fiscal Outlook

Lucy Dadayan and Donald J. Boyd

Preliminary data for the January-March quarter of 2013 show continued growth in overall state tax collections, mostly driven by very strong growth in personal income tax collections, reflecting taxpayer actions to accelerate income, slow but continuing improvement in the economy, and the impact of a large tax increase in California. In fact, the growth in personal income tax collections was the strongest since the start of the Great Recession, although with California excluded the growth was much weaker.

 

The rapid income tax growth in the first quarter of 2013 is consistent with the previous assumptions that personal income tax collections would grow strongly in the fourth quarter of 2012 as well as in the first and second quarters of 2013, due in large part to the acceleration of income into calendar year 2012 by some taxpayers in an effort to avoid higher federal income tax rates.

 

We will provide a full report on January-March tax revenue collections after the Census Bureau's data for the quarter are available.

 

The Rockefeller Institute's compilation of preliminary data from 47 states shows that collections from major tax sources increased by 9.3 percent in nominal terms in the first quarter of 2013 compared to the same quarter of 2012. Among 47 early-reporting states, 39 states reported gains while eight states reported declines in total tax revenue collections. Sales tax growth was 6 percent, and corporate income tax growth was 3.5 percent. (See Table 1 for national-level changes in revenues since 2007.) Personal income tax collections had the strongest growth among the major taxes, at 17.6 percent. However, the strong growth is attributable not only to the acceleration of income into calendar year 2012, but also to strong growth in a single state, California, where income tax collections grew by nearly $6.3 billion or 52.2 percent in the first quarter of 2013. The large growth in income tax collections in California reflects the acceleration as well as recent increases in income tax rates that were only partially reflected in withholding. If we exclude California, income tax collections in the remainder of the nation show growth of 9 percent in the first quarter of 2013.

 

Table 2 shows state-by-state changes in major tax revenues during the first quarter of 2013 compared to the same quarter a year earlier. North Dakota and California reported the largest increases in overall tax collections, at 74.6 and 34.9 percent, respectively. Another five states also indicated double-digit growth in overall tax collections.

 

State tax revenues have been continuously recovering for over three years now. However, state revenue recovery has been much slower and more prolonged than in previous recoveries, and revenue is still far from full recovery. While state tax revenues have shown strong growth in the fourth quarter of calendar year 2012 and in the first quarter of calendar year 2013, that is likely not an indication of rapid improvement in underlying economic factors. The strong growth in personal income tax collections appears in large part attributable to (1) taxpayers' efforts to shift income from 2013 to 2012 in order to avoid paying higher income rates in 2013 as a result of the American Taxpayer Relief Act as discussed in the Rockefeller Institute's State Revenue Report dated February 2013, which would have boosted estimated payments of income taxes and withholding on bonuses in the first quarter of 2003, and (2) the idiosyncratic timing of California's tax increase. States likely will report strong growth in tax revenues in the second quarter of 2013 as well, mostly due to the April 15th income tax return deadline. However, the state tax revenue outlook beyond the second quarter of 2013, particularly for states that rely heavily on personal income tax collections, remains cloudy.

 

Table 1: State Taxes Showed Strong Growth in the First Quarter of 2013

Percent Change in State Tax Collections vs. Same Quarter a Year Ago

Year/Quarter

PIT

CIT

Sales

Total

2007 Q1

8.5

14.8

3.1

5.2

2007 Q2

9.2

1.7

3.5

5.5

2007 Q3

7.0

(4.3)

(0.7)

3.1

2007 Q4

3.8

(14.5)

4.0

3.6

2008 Q1

4.8

(1.4)

0.7

2.6

2008 Q2

8.1

(7.0)

1.0

5.4

2008 Q3

0.9

(13.2)

4.7

2.8

2008 Q4

(1.9)

(23.0)

(5.3)

(4.0)

2009 Q1

(19.4)

(20.2)

(8.4)

(12.2)

2009 Q2

(27.7)

3.0

(9.5)

(16.3)

2009 Q3

(11.5)

(21.3)

(10.1)

(11.0)

2009 Q4

(4.1)

0.7

(4.8)

(3.1)

2010 Q1

3.6

0.3

0.1

3.3

2010 Q2

1.3

(19.0)

5.7

1.9

2010 Q3

3.9

0.5

4.3

5.3

2010 Q4

10.8

12.1

5.1

8.1

2011 Q1

12.6

4.1

6.0

10.1

2011 Q2

15.6

18.3

5.7

11.3

2011 Q3

9.1

0.9

1.5

4.9

2011 Q4

2.8

(3.3)

2.8

3.0

2012 Q1

4.2

3.4

4.9

4.0

2012 Q2

6.0

(4.6)

1.7

3.8

2012 Q3

5.0

7.2

2.6

3.1

2012 Q4

10.8

1.2

2.7

5.2

2013 Q1 (preliminary)

17.6

3.5

6.0

9.3

 


 

Table 2: Percent Change in State Quarterly Tax Revenue

January-March 2012 to 2013, Percent Change

PIT

CIT

Sales

Total

United States

17.6

3.5

6.0

9.3

New England

8.2

3.6

(2.1)

4.7

Connecticut

6.0

(4.1)

(7.1)

3.7

Maine

13.3

(30.9)

(1.8)

1.4

Massachusetts

10.3

10.1

0.8

7.5

New Hampshire

NA

5.2

NA

0.7

Rhode Island

(6.6)

(16.3)

2.9

(4.1)

Vermont

9.2

15.0

0.4

3.0

Mid-Atlantic

8.6

1.6

3.5

6.2

Delaware

(14.4)

8.3

NA

(6.6)

Maryland

7.6

(8.0)

(1.0)

2.8

New Jersey

13.2

(20.1)

9.7

9.1

New York

8.6

6.4

3.7

8.5

Pennsylvania

7.1

11.8

(0.4)

2.0

Great Lakes

10.6

(5.1)

0.2

4.7

Illinois

3.5

25.5

1.3

3.6

Indiana

(0.5)

(129.3)

2.5

(0.3)

Michigan

115.2

(65.8)

(6.7)

4.2

Ohio

12.9

75.1

3.4

10.8

Wisconsin

2.3

15.8

2.2

3.9

Plains

5.1

(6.1)

1.1

5.5

Iowa

16.7

(28.5)

1.6

7.6

Kansas

(6.5)

(26.2)

1.4

(8.6)

Minnesota

ND

ND

ND

ND

Missouri

4.6

20.7

0.8

2.7

Nebraska

(3.5)

3.4

1.3

(1.8)

North Dakota

36.0

13.7

(2.4)

74.6

South Dakota

NA

NA

4.4

0.3

Southeast

10.0

9.5

1.9

5.1

Alabama

6.3

5.7

0.2

4.5

Arkansas

11.7

14.7

0.5

3.4

Florida

NA

0.8

5.3

5.4

Georgia

7.5

41.5

2.5

6.2

Kentucky

7.7

59.8

(2.6)

0.2

Louisiana

18.3

(56.0)

(2.6)

7.4

Mississippi

65.0

(8.0)

3.1

8.1

North Carolina

3.8

13.1

(2.0)

7.5

South Carolina

50.8

80.3

2.5

13.4

Tennessee

NA

7.1

0.6

2.0

Virginia

11.7

(48.0)

1.9

5.1

West Virginia

(5.6)

452.4

(3.6)

(3.1)

Southwest

3.6

14.7

4.9

1.1

Arizona

8.9

(2.0)

3.7

3.7

New Mexico

ND

ND

ND

ND

Oklahoma

(1.9)

32.4

0.7

(0.2)

Texas

NA

NA

5.5

0.8

Rocky Mountain

9.8

58.1

1.6

8.3

Colorado

16.3

74.0

2.0

12.9

Idaho

(0.4)

3.2

7.3

4.3

Montana

13.7

NM

NA

19.8

Utah

(0.4)

34.1

(3.0)

0.7

Wyoming

NA

NA

ND

ND

Far West

47.9

3.4

21.9

25.4

Alaska

NA

(16.0)

NA

(43.8)

California

52.2

3.5

28.2

34.9

Hawaii

27.0

(51.3)

6.6

8.1

Nevada

NA

NA

6.2

4.9

Oregon

7.5

43.0

NA

12.6

Washington

NA

NA

6.3

5.1

Source: Individual state data, analysis by the Rockefeller Institute.
Notes:   NA - not applicable; NM - not meaningful; ND - no data.

 

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