News Release - States Continue to Collect More Taxes through Early 2012, Report Finds

NEWS

For Immediate Release –

August 2, 2012

Media contact: Heather Trela - (518) 443-5831
e-mail: communications@rockinst.org

States Continue to Collect More Taxes through Early 2012, Report Finds

Yet fiscal challenges remain even after nine straight quarters of increases

Albany, N.Y. — States' tax collections grew for the ninth straight quarter in the first three months of 2012, according to Rockefeller Institute research and Census Bureau data.

Overall state tax revenues are now above pre-recession levels, as well as above peak levels that came several months into the Great Recession. In the first quarter of 2012, total state tax revenues were 4.8 percent higher than during the same quarter of 2008.      

Starting at the end of 2008 and extending through 2009, states suffered five straight quarters of decline in tax revenues. They now have enjoyed nine consecutive periods of growth, and the second quarter of 2012 will likely extend the string to 10. Overall collections in 45 early-reporting states showed growth of 5.8 percent in the months of April and May of 2012 compared to the same months of 2011.    

After adjusting for inflation, however, state tax revenues are still 1.6 percent lower compared to the same quarter four years ago, in 2008. Even in nominal terms, total tax collections in the first quarter of 2012 remained lower than the first quarter of 2008 in 21 states. States in New England and the Southeast reported declines in the first quarter of 2012 compared to the same period of 2008 — at 3.0 and 1.6 percent respectively.  

The growth in state tax revenues has been neither fast nor uniform across states. However, state fiscal conditions in general have recovered faster than the overall economy, as measured by gross domestic product (GDP), employment or consumer spending. Along with the very deep drop in state revenues during and immediately after the Great Recession, this recovery in revenues thus reveals a growing volatility, and uncertainty, in state tax revenues, which have expanded and contracted much more than general economic indicators during the past two recessions.

While state tax revenues have been recovering, many localities face significant fiscal challenges, according to the report’s author, Senior Policy Analyst Lucy Dadayan.  

“The Great Recession led to a growing divergence between state and local government tax performance,” Dadayan said. “State tax revenues collapsed steeply from 2008 to 2010 while local tax revenues continued to grow. Such trends have reversed since 2010, and state tax revenues started trending upward while local tax revenues have been mostly heading downward. Fiscal pressures are continuously mounting for local governments, and depressed housing prices are now causing declines in local property taxes.”

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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