Revenues for most U.S. states continued to fall in the second quarter, with 36 states reporting an overall decline of 0.8 percent from the same period in 2013, according to a report released on Thursday.
The Nelson A. Rockefeller Institute of Government, a public policy research unit of the State University of New York, which closely monitors state budgets, said that in the first quarter of this year, total state tax collections posted a decline of 0.3 percent—the first drop recorded in four years.
In the second quarter, the contraction persisted due to a 6.5 percent drop in the largest revenue category for states, personal income taxes. The quarter includes April, a key month for personal income taxes due to the federal filing deadline.
Due to a change in the federal tax code, states saw a surge in revenue in 2013. Taxpayers sold off investments, paid bonuses and made other financial moves in the final hours of 2012 as the so-called Bush tax cuts expired.
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This created a bulge of taxable income in April 2013 with total state revenue surpassing its pre-recession peak when adjusted for inflation that year.
But in 2014, the states have had to deal with a lingering hangover. Many prepared for a revenue drop this April, but were surprised by its magnitude.
Sales tax collections, meanwhile, likely grew 4.5 percent in the second quarter from a year earlier.
The U.S. Census has reported that total state tax revenue was $206.8 billion in the first quarter, down 0.3 percent from the same quarter of 2013, and individual income tax collections fell 1.4 percent, to $72.6 billion. Nonetheless, income taxes were much higher than sales tax collections, following a trend that began in 2011, the Census said.
—By Reuters