News Release: State Tax Revenues Across U.S. Are Flat for First Time Since 2002 Recession, New Rockefeller Institute ‘Flash’ Report Shows

For Immediate Release –

November 6, 2008

Media contact: Mark Marchand – (518) 443-5283 / marchanm@rockinst.org

State Tax Revenues Across U.S. Are Flat for First Time Since 2002 Recession, New Rockefeller Institute ‘Flash’ Report Shows

Further Deterioration Expected After Weak 3rd Quarter of 2008

Albany, N.Y. — State tax collections across the country continued their downward trend during the third quarter of 2008, according to a preliminary report issued today by the Rockefeller Institute of Government.

The report shows that total tax revenues for the 42 states surveyed for the Institute’s “flash” report were essentially flat, rising at a rate of only 0.1 percent during the third quarter of 2008, when compared to the same quarter a year earlier. That was down sharply from the 50-state growth rate of 3.6 percent during the second quarter of 2008. This was the first quarter since the 2002 recession that state tax revenues failed to increase from the previous year.

Seventeen of 42 early-reporting states reported declines in total tax revenues, when compared to the same quarter in 2007. When adjusted for economy-wide inflation of 2.7 percent, state tax collections declined overall by 2.6 percent.

“We expect revenue collections to deteriorate further in coming quarters and believe they are likely to be down substantially when income tax returns are filed in the April-June quarter of 2009,” said Donald J. Boyd, senior fellow at the Institute and co-author of the report. “We expect further revenue shortfalls and mid-year budget cutting among states as the fiscal year progresses.”

Lucy Dadayan, senior policy analyst at the Institute, was co-author of the report

Income taxes and sales taxes lead downward trend

Growth in the two largest taxes that make up states’ overall tax collections, income and sales taxes, was either flat or down when compared to last year. Personal income tax revenue was up only 1.5 percent during the third quarter, while sales tax collections dropped by 0.7 percent. Corporate income tax collections, while representing a relatively small percentage of the tax base, were down 8.3 percent from last year.

“The sales tax decline is particularly noteworthy because it reflects the leading edge of the just-beginning decline in consumer spending,” Boyd said.

Quarter over quarter, states in the Far West fared the worst in the preliminary report, while Southeastern states — while continuing to show weakness in tax collections — were down about as much this quarter as last quarter.

The Institute expects to issue its formal 50-state report, based on U.S. Census data, at the end of December.

To see the overall report, visit: www.rockinst.org.

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About the Rockefeller Institute of Government

The Nelson A. Rockefeller Institute of Government, at the University at Albany, is the public policy research arm of the State University of New York. The Institute conducts fiscal and programmatic research on American state and local governments. Journalists can find useful information on the Newsroom page of the Web site, www.rockinst.org.

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