Despite Slow Growth, Tax Revenue Has Recovered in 31 States
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But the national trend masks how widely recovery has varied across the states.
This article was originally published at the States' Fiscal Health project, an initiative of The Pew Charitable Trusts, and was written by Barb Rosewicz and Daniel Newman.
Tax revenue has recovered slowly and unevenly after falling in every state during the Great Recession. By the first quarter of 2016, tax collections had bounced back in 31 states after accounting for inflation. But amid inconsistent growth, receipts had slumped in 17 states at the start of the year.
Nationally, total state tax revenue recovered in mid-2013 from losses in the recession that ended in 2009. In the first quarter of 2016, states collectively took in 6.5 percent more tax revenue than they did in the third quarter of 2008 before receipts plunged in the recession, after accounting for inflation and seasonal fluctuations.
But the national trend masks how widely recovery has varied across the states. In eight of the 31 states in which tax revenue had rebounded by the first quarter of 2016, receipts were more than 15 percent higher than at their inflation-adjusted peak before or during the recession. Conversely, collections in four of the 19 states with below-peak tax revenue were down 15 percent or more, after adjusting for inflation.
Although total state tax revenue rose for the seventh straight quarter at the beginning of 2016, state-by-state growth trends were mixed. In 17 states, tax collections fell in the first quarter of 2016, including in eight states that have recovered from their recession-era losses. Besides tax revenue fallout from a steep drop in oil prices, other reasons for tax declines included a weak stock market, state tax cuts, and growth that was slower than inflation.
State results differ dramatically because of variations in economic conditions, population changes, and tax policy choices since the recession. Among states in which tax revenue has recovered, some such as California and Minnesota raised taxes after the recession, contributing to gains. Among states in which receipts remain below their previous peaks, some such as Florida and Ohio chose to cut taxes since the recession.
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