The Rockefeller Institute of Government at the State University of New York reported that state tax revenues grew about 5.8% in the first quarter of 2015. All major sources of tax revenue had solid growth – personal income tax receipts were up 7.1%, corporate taxes were up 3.3%, sale taxes up 5.2% and motor fuels taxes up 4.4%. Local property tax growth was also positive, but far less strong, increasing about 2.1%. The positive revenue growth confirms that the prolonged economic expansion is improving state and local governments’ fiscal performance. Since the recession that started in 2007, it has taken longer than in prior cycles for real retail sales and employment to return to pre-recession levels. The Rockefeller Institute’s graphs below show just how slow this economic recovery has been. Looking forward, the Institute warns that uncertainty related to volatility in the stock market may reduce income tax revenue, and also that states reliant on the energy sector will be adversely impacted by the selloff in crude oil. Overall, the 2016 revenue outlook for the states is positive, but revenue growth is weaker in the post “Great Recession” economy, which means states will need to be conservative with expenditures.
Sources: The Rockefeller Institute of Government at the State University of New York, “State Revenue Report” September 2015, No. 100; SNWAM Research