States Report Strong Tax Revenues in Fiscal 2011

Published April 13, 2012

State government tax collections in Fiscal 2011 showed strong year-over-year growth compared to fiscal 2010 collections, according to Census Bureau data released April 12. Fiscal 2011 ended on June 30, 2011 for 46 states.

Fiscal 2011 total state government tax collections increased by 8.9 percent. Personal income tax grew by 9.8 percent, sales tax by 8.2 percent, and corporate income tax by 9.4 percent, according to the Census Bureau.

Personal income tax collections were still 6.8 percent below the 2008 levels. At the end of fiscal 2011, overall tax collections were still 2.1 percent below the peak tax collections levels, and sales tax collections were above by an insignificant 0.3 percent.

North Dakota Leads Pack

North Dakota was the only state where overall tax revenues showed continued growth, regardless of the recession.

Overall state tax revenues still have a long way to go before they fully recover from the deep declines caused by the Great Recession. The extent of revenue recovery varies dramatically among the states. Overall, 32 states reported fiscal 2011 total-tax collections that were still below peak levels; 10 of those declines were by double-digit percentages. Only 17 states reported fiscal 2011 total taxes that were higher than previous peak levels.

Eighteen states reported sales taxes in fiscal 2011 that surpassed earlier peak revenues. Sales tax revenues were below the peak levels in 28 states, of which 7 states saw double-digit declines. Arizona reported the largest decline in sales tax collections compared to its peak level at 32.5 percent, followed by Louisiana at 19.2 percent.

Personal Income Ht Hardest

Personal income tax collections have suffered the most persistent and widespread declines, despite strong growth in the last year or so. Among 43 states with personal income taxes, 38 states reported declines in personal income tax collections in fiscal 2011 compared to their peak levels, with 18 states reporting double-digit declines. Only five states have seen increases in their personal income tax collections since peak levels.

Nonetheless, fiscal 2011 was a better year for state tax revenues than fiscal 2010. The year-over-year growth rates in overall tax collections in fiscal 2011 ranged from 0.4 percent in Hawaii to 44.5 percent in North Dakota.

In terms of sales tax collections, South Carolina and Virginia were the only two states reporting declines in fiscal 2011 compared to fiscal 2010 at 1.4 and 2.3 percent, respectively. All states with broad-based personal income tax collection, but Hawaii, reported growth in personal income tax collections in fiscal 2011 compared to fiscal 2010.

While the growth rates in fiscal 2011 tax collections were relatively strong compared to 2010, such growth is not sustainable over time. The preliminary tax revenue data from Census Bureau for the first and second quarters of fiscal 2012 indicate a noticeable softening of tax revenue growth compared to fiscal 2011 collections.

Lucy Dadayan ([email protected]) is a senior policy analyst at the Rockefeller Institute of Government in Albany, N.Y.