News Release - State Tax Collections Turn Sharply Negative in Fourth Quarter 2008

For Immediate Release –

January 16, 2009

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

State Tax Collections Turn Sharply Negative In Fourth Quarter 2008, Preliminary Data Show; Further Declines Expected in 2009

New Rockefeller Institute of Government Report Shows Third-Quarter Weakness Leading To ‘Dramatic Worsening’ in October and November

Albany, N.Y. — The weakening economy is creating a sharply larger drain on states’ tax collections, according to preliminary fourth-quarter data in a report released today by the Rockefeller Institute of Government.

Total tax collections for states declined overall by more than 4 percent during the opening months of the fourth quarter of 2008, when compared to the same period a year earlier, according to available data.

“The first and second quarters of 2009 will likely bring further revenue declines, as weakening conditions in the economy are reflected in major losses for sales and income taxes relative to a year earlier,” said study co-author and Institute Senior Fellow Donald J. Boyd. “States are reflecting expectations of large declines in the budgets currently being proposed by governors. Whether they are reducing their forecasts enough to keep up with declines of these magnitudes is an open question.

For the third quarter of 2008, the full Institute report showed that tax collections in all 50 states slowed from their artificially higher growth rate in the second quarter, and showed a modest gain of 3.2 percent when compared with the third quarter of 2007. When adjusted for legislative changes, known anomalies, and inflation, state tax revenue across the United States was down 0.2 percent for the third quarter. Tax revenue declined in 29 states, with a median change of down 1.2 percent.

“Much of the growth in state taxes (during the third quarter) was attributable to a quadrupling of tax revenue in a single state: Alaska,” Boyd said.

Regional Differences

The report noted that the Southeast region was the weakest area for tax collections during the third quarter of 2008, while the Mid-Atlantic region appears to be on the cusp of significant declines. In addition, local government tax collections only grew 0.6 percent in the third quarter when compared to a year earlier.

Boyd wrote the report with Institute Senior Policy Analyst Lucy Dadayan.

For a full copy of the 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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