State tax revenues slip back to slower growth

March 12, 2014

The Rockefeller Institute said in a note about fourth-quarter state tax revenues that revenues continue to be positive, but they have slowed from the first half of the year. Personal income taxes made up about 41 percent of total state tax revenue in the fourth quarter of 2013 and slowed considerably from the first half of the year. Rockefeller writes:

The state personal income tax revenue picture in the first two quarters of calendar year 2013 represented the strongest growth since the start of the Great Recession. However, the growth in personal income tax collections softened in the third quarter of 2013 and was a mere 1.0 percent in the fourth quarter of 2013.

Personal income taxes are the bedrock of state tax revenues. But state sales taxes are also important and showed nice, steady gains. From Rockefeller again:

Sales tax collections increased by 5.5 percent in the fourth quarter of 2013 compared to the same quarter of 2012. According to preliminary data, only six of 45 sales-tax states reported declines in sales tax collections compared with the same quarter last year. Arizona had the largest sales tax decline at 14.4 percent, followed by Georgia at 4.6 percent. The large sales tax decline in Arizona is mostly due to expiration of a temporary one-cent increase in sales tax of three years ago. The following five states reported double-digit growth in sales tax collections: California, Maine, Minnesota, Ohio, and Virginia.

Rockefeller sums it up:

The strong growth recorded in the first half of 2013, as discussed in previous State Revenue Reports, appears to have been mostly attributable to the acceleration of income to tax year 2012 by some taxpayers driven by the fear of potential federal tax rate increases in tax year 2013. We now are witnessing the earlier warnings that the ‘bubble’ in income tax receipts would be short-lived. And, quite likely, the growth in personal income tax collections will be much softer in the first half of 2014 as well. However, in most states, the overall trend in tax collections for fiscal 2014 is positive.

Stay tuned.

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New Mercatus study on the 50 states: Arnett_StateFiscalCondition_v1.pdf

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