Policy Documents

April 'Surprises' More Surprising Than Expected

Lucy Dadayan and Donald J. Boyd –
June 12, 2014

The April 15, 2014 deadline for personal income tax returns brought bad news for nearly every state that has a broad-based income tax. While the direction of the April “surprise” was anticipated, the magnitude was underestimated in many states.

The declines in income tax collections appear to have been driven mostly by behavior of taxpayers, who shifted income from tax year 2013 to tax year 2012 to minimize federal tax liability. The situation was further complicated in states that reduced income tax rates, including Kansas, Maine, Michigan, Nebraska, North Dakota, and Ohio, where it was difficult to sort out the effects of tax cuts from declines in underlying income. Minnesota was the only state to increase income tax rates in 2013.

This report details the surprises and what might be behind them, including shifting of taxes to avoid higher federal taxes.