News Release - State Tax Collections Across U.S. Plummeted in First Quarter, New Rockefeller Institute Report Shows

For Immediate Release –

May 13, 2009

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

State Tax Collections Across U.S. Plummeted in First Quarter, New Rockefeller Institute Report Shows

Report Reveals 12.6 Percent Decline in Overall State Tax Collections During First Quarter of 2009; Personal Income Tax Falls Sharply

Albany, N.Y. — The weakened national economy continued to erode state tax collections during the first quarter of 2009, with overall tax collections falling 12.6 percent, according to a new report from the Rockefeller Institute of Government.

The preliminary report, which included data from 47 of the 50 states, noted that the 15.8 percent decline in the personal income tax component — one of the three major sources of states’ tax revenues — was the largest such decline since 2002. The revenue data in today’s report compared the first quarter of this year to the same period last year.

“We expect revenue collections, particularly collections from the personal income tax, to deteriorate even further in the April-June quarter based in large part on declines in financial markets and income tax returns due in April,” said study co-author and Institute Senior Policy Analyst Lucy Dadayan.

In addition to the personal income tax drop, the report noted that sales tax collections in the states continued to drop — falling off 7.6 percent — and corporate income tax collections fell 16.2 percent. This is the second quarter in a row that revenue from all three major sources of tax revenue for the states declined.

After adjusting for inflation, overall tax revenues declined by 14 percent during the first quarter, compared to the same quarter in 2008.

Regional Differences

The Far West region suffered the worst falloff in tax collections, with revenue down by 18.1 percent overall. The Plains states saw the smallest reduction, with a decrease of 5.0 percent. The results from other regions were:

“The revenue situation worsened in nearly every state in the first quarter of 2009, including states that rely heavily on energy resources — most of these states had been spared the worst of the fiscal crisis until recently,” Dadayan said. “Deeper revenue shortfalls and more budget adjustments are likely on the way for at least the next two quarters of this year.”

Dadayan noted that state tax revenues generally fall sharply after a recession for two or more years before any recovery.

“While some experts say the beginnings of an economic recovery may be underway, deterioration in the fiscal picture for states will likely continue in the near term,” Dadayan added.

The Institute will release a full first-quarter report on all 50 states when Census Bureau data are available in several weeks. The preliminary report issued today did not include data on Montana, Nevada, and New Mexico.

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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