Research Report State Tax and Economic Review, 2023 Quarter 3
State Revenues Remained Sluggish in the Third Quarter of 2023
Lucy Dadayan
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Total state government tax revenue collections declined 1.2 percent in nominal terms and 4.3 percent in real terms in the third quarter of 2023 relative to a year earlier. The inflation-adjusted growth rates differed significantly across key revenue sources in the third quarter of 2023. Personal income tax revenues declined 2.9 percent, corporate income tax revenues declined 0.3 percent, sales tax revenues decreased 1.5 percent, and motor fuel tax collections increased 10.6 percent compared to the same period a year earlier.

Preliminary data show some rebounding in nationwide state tax revenue collections in the fourth quarter of 2023. However, most of the growth is attributable to the strong revenue collections in California, where revenues were temporarily boosted because of delayed income tax payments. Nominal state tax revenue collections increased by 6.1 percent in the fourth quarter of 2023 compared with the same period in 2022, primarily due to growth in income tax revenues. The median state, however, reported only a 0.7 percent growth. State tax revenues increased in 27 states in nominal terms, while 19 states reported year-over-year declines for the fourth quarter of 2023.

States’ fiscal path forward remains highly uncertain, particularly for states that enacted permanent tax rate cuts. State revenues are also influenced by a combination of ongoing factors, including ongoing geopolitical crises, inflation, stock market and oil price volatility, federal monetary policy, banking instability, shifts in consumer spending patterns, and natural disasters, among others.

Research Areas State and local finance
Tags State and local tax issues Individual taxes State programs, budgets Fiscal policy
Policy Centers Urban-Brookings Tax Policy Center
Research Methods Data analysis Data collection Quantitative data analysis
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