News Release - State Taxes Across U.S. Take Second Consecutive Record Plunge

For Immediate Release

Oct. 15, 2009

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

State Taxes Across U.S. Take Second Consecutive Record Plunge,
New Rockefeller Institute Report Shows

Record 16.6 Percent Drop in Second-Quarter State Revenues Expected to Lead to More Budget Crises;
Institute Will Conduct 11 a.m. News Briefing Today

Albany, N.Y. — For the second quarter in a row, tax revenues collected by states across the U.S. plummeted sharply in April-June 2009, according to the latest quarterly report on state revenue collections issued today by the Rockefeller Institute of Government.

When compared to the same period one year earlier, second-quarter 2009 tax revenues in the 50 states dropped a record 16.6 percent — the second consecutive quarter in which revenues fell more sharply than during any previous time on record. Forty-nine states saw total tax revenue fall during the quarter, with 36 states reporting double-digit declines.

(Editor’s note: The Institute will conduct a live, dial-in news briefing for journalists at 11 a.m. EST today: 888-299-4099, pass code, VM18133.)

Tax collections for two major sources of revenue — sales taxes and personal income taxes — declined for the third consecutive quarter. Income tax was down by 27.5 percent, while sales tax was down by 9.5 percent.

Preliminary figures for July and August for 36 early-reporting states show continued deterioration, with overall tax collections dropping 8 percent.

“Many economists believe that the national recession has ended and that a tepid recovery is now underway,” the authors of the report — Senior Policy Analyst Lucy Dadayan and Senior Fellow Donald J. Boyd — wrote. “Unfortunately for states, an emerging economic recovery does not spell instant budget relief.

“As we have noted previously, some elements of the economy that are very important to state finances — particularly employment and wages — are likely to recover more slowly than gross domestic product. In addition, state tax revenue, when it does begin to recover, will be below its earlier peak for at least several years and will not be sufficient to support spending commitments that are now in place. Despite the recovery, most states will face budget gaps this fiscal year and next, and probably for at least one to two additional years.”

For the year ending in June 2009, the period corresponding to most states’ fiscal years, total state tax collections declined by $63 billion or 8.2 percent from the previous year. That loss is roughly twice the amount states gained during the year in fiscal relief from the federal stimulus package.

On a regional basis, Alaska suffered the worst, with a drop-off of 86.5 percent due to the recent drop in oil prices. Vermont fared the best, with a 2.2 percent growth in tax revenues, primarily due to a one-time estate-tax settlement. South Dakota suffered a drop-off of only 0.8 percent in the second quarter.

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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