State Tax and Economic Review

The State Tax and Economic Review is the preeminent source of data and analysis on state tax collections. The State and Local Finance Initiative regularly collects data and information from all 50 states, uses this information to adjust national and state data from the US Census Bureau, then provides the most timely, accurate, and in-depth look at how states are faring. We examine the economic factors driving state tax collections based on data from US federal agencies like the Bureau of Economic Analysis, Bureau of Labor Statistics, and Federal Housing Finance Agency.

CONTACT: Lucy Dadayan, senior research associate, Urban Institute

Reports

Are States Betting on Sin? The Murky Future of State Taxation
"Sin taxes" are often viewed as budget saviors, though they play a rather small role in state budgets. Although states raise revenue from sin taxes, policymakers should be mindful of these taxes’ limitations. Absent policy changes (such as increased tax rates), long-term growth for sin tax revenue has often been weak and limited. Moreover, greater dependence on sin tax revenues can lead to odd incentives: part of the reason for taxing some of these activities is to discourage consumption and use rather than to maximize revenue. This report reviews the long-term revenue trends from the three most common sin taxes (alcohol, tobacco, and gambling) and explores how changes in economic activity may affect future revenues. The report also reviews the current status of emerging sin taxes, examining taxes on marijuana and providing overview for taxes on e-cigarettes and sugar-sweetened beverages.

Turbulence Continues in State Tax Revenues in the First Half of 2019, Largely Related to TCJA Federal Tax Changes
State government tax revenues rebounded in the first quarter of 2019 after declines in the fourth quarter of 2018. However, year-over-year growth was substantially weaker in the first quarter of 2019 than in the final quarter of 2017 and the first three quarters of 2018. Most of the recent weakness was attributable to personal income tax declines. State personal income taxes declined for the second consecutive quarter, reflecting a spike in state income tax payments in December 2017 and January 2018 in response to changes made in the TCJA. However, preliminary data for the second quarter of 2019 indicate double-digit growth in state personal income tax revenues, mostly because of higher final payments and delayed estimated payments filed in April. The surge in personal income tax revenues made up for earlier shortfalls in most states and put the revenues back on track for the states to close the budget books for fiscal year 2019 without shortfalls.

State Revenues Were Weak in The Fourth Quarter of 2018; But Revenue Outlook for FY 2019 Remains Positive
State government tax revenues from major sources declined in the fourth quarter of 2018 compared with the same quarter in 2017, mostly because of declines in state income tax revenues. The declines in income tax collection are partially attributable to the disappearing impact of incentives created under the TCJA to accelerate payments of state and local income taxes into tax year 2017. However, most states saw positive April surprises when income tax returns were filed. Although growth in income tax collections this April was the largest in the past 10 years, the surge should be viewed as a one-time occurrence. 

State Revenues Grew in Third Quarter, but Income Taxes Face Uncertain Prospects
State government tax revenues have fluctuated wildly over the past year largely because of the Tax Cuts and Jobs Act passed in late December 2017. Overall, year-over-year growth in state tax revenues was strong in the third quarter of 2018 but weaker than the growth observed in the final quarter of 2017 and the first half of 2018.

Another Stellar Quarter of State Revenue Growth, But the Pace Is Slowing
Total state tax revenue topped $1 trillion for the first time in fiscal year 2018, a 7.8-percent gain over 2017. But much of this record revenue growth was the result of tax payments in response to the Tax Cuts and Jobs Act. State officials would be wise to view recent revenue increases as a one-time windfall and anticipate slower revenue growth in the medium term. 

State Tax Revenues Soar in the First Quarter of 2018
Total state tax revenue from all sources showed strong growth in the final quarter of 2017 and the first quarter of 2018. The largest increases were in individual income tax revenues. Economic factors driving state revenue were all positive in the first quarter of 2018. However, large fiscal uncertainties lie ahead in response to federal tax changes, the Wayfair decision, and state responses to both.

Blog posts

Tax Day is Here, and State Budget Offices Share Your Fears and Hopes for a Good Return
State budget officers are scrambling to figure out what revenues will look like this year. With states still adapting to the Tax Cuts and Jobs Act and an uncertain economy in some parts of the country, this work is particularly difficult this year.

State Revenue Picture in Post-TCJA Era: Joy, Sorrow, and Uncertainty
Much of the recent revenue growth came from increases in personal income tax revenues in late 2017 and the first half of 2018, but those revenues fell sharply in December 2018 and January 2019, according to preliminary data

States Enjoyed Another Stellar Quarter of Revenue Growth; But the Longer-Term Fiscal Outlook is Cloudy
States closed their fiscal 2018 books at the end of June on a positive note. But they shouldn’t bank on the good times lasting forever. In fact, they have more reason for caution than optimism going forward.