State Tax and Economic Review, 2019 Quarter 2

Research Report

State Tax and Economic Review, 2019 Quarter 2

Windfall “April Surprises” Made Up for Earlier Shortfalls; State Taxes Returned to Normal Levels in the Third Quarter
November 26, 2019

Abstract

State government tax revenues fluctuated wildly throughout state fiscal year 2019, which ended on June 30th in 46 states. The fluctuations were largely related to income tax receipts and caused by the Tax Cuts and Jobs Act.

Overall, state tax revenues showed robust growth in the second quarter of 2019 after much weaker growth in the fourth quarter of 2018 and modest growth in the first quarter of 2019. Most of the growth in the second quarter of 2019 was fueled by a large increase in income tax collections due to shifts in the timing of income tax payments by some taxpayers.

Economic factors driving revenue growth were all positive in the second quarter of 2019 despite overall concerns that the economic expansion, now the longest on record, may soon be over and that the US economy may be headed for a downturn. As always, growth in economic factors must be viewed with caution. Moreover, growth in some of the economic factors had weakened in the second quarter of 2019.

Preliminary data for July-September 2019 indicate that growth in overall state tax revenue collections returned to normal levels, mostly due to disappearing impact of the Tax Cuts and Jobs Act.

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