Research Report State Tax and Economic Review, 2018 Quarter 3
State Revenues Grew in Third Quarter, but Income Taxes Face Uncertain Prospects
Lucy Dadayan
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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.

Preliminary state government tax data for the fourth quarter of 2018 indicate declines in personal income tax collections, which was largely anticipated and is 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. In addition, wild swings in the stock market throughout the fourth quarter of 2018 likely also contributed to personal income tax declines.

Although the near-term economic outlook is positive, state revenue forecasters would be prudent to maintain a cautious revenue outlook for the remainder of state fiscal year 2019 and fiscal year 2020.

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Research Areas Taxes and budgets State and local finance
Tags State and local tax issues Individual taxes
Policy Centers Urban-Brookings Tax Policy Center