Tax Revenues Fall Sharply, Report Finds

By: - November 7, 2001 12:00 am

For the first time in at least ten years, state revenues recorded a quarterly drop from one year to the next, according to a report released Wednesday (11/7) by the Nelson A. Rockefeller Institute of Government.

Total state revenue collections for this year’s July through September quarter were 3.4 percent less than the same quarter last year, the first such decline Rockefeller has recorded since it started tracking state revenues over a decade ago.

Personal income tax collections fell even more sharply, dropping 4.2 percent. California, Massachusetts and New York saw these collections plummet.

Corporate income tax collections continued their steep decline, falling 25 percent.

Sales tax revenues, which were among the first to fall earlier this year, declined a comparatively slight 0.1 percent.

“It’s all come home to roost now in the personal income tax. That was sort of holding the whole system up in the last few quarters but it’s now feeling the affects of the slowing economy,” said Nicholas Jenny, fiscal analyst at Rockefeller. “Ironically, the sales tax, which had been weak for a while, is now the strongest.”

The report finds that revenue changes varied greatly from state to state.

  • Oregon’s total tax collections fell 17.6 percent for the quarter, the steepest decline among the states
  • Vermont was next at 13.6 percent.
  • The nation’s economic engines, California and New York, followed with declines of 9.3 and 9.5 percent respectively.

“It does seem to be a little worse in the Northeast and the Far West,” said Jenny. “California had very bad returns in the recent quarter. Those tend to be the states that are dependent on relatively progressive income taxes. It may be that that’s where the weakness is at this point.”

Strong performers include Delaware, where revenue rose 11.9 percent, and Montana, which recorded a 7.3 percent increase.

It should be noted that Rockefeller’s report is based on preliminary data — New Jersey, North Carolina, New Mexico and Wyoming have yet to announce their numbers for the quarter and the figures for a handful of other states are missing a month or two. Jenny said Rockefeller’s totals should change by only one or two tenths of a percent when all data is included.

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