(Reuters) - New
Jersey, which revealed a massive budget shortfall this week, is far from alone
in feeling the pinch of lower income tax revenues in the key month of April, a
Reuters analysis shows.
income tax collections plunged last month from a year earlier in 27 of 32
states for which Reuters was able to collect data. That's most of the 43 states
that levy income taxes, and drops were as high as 50 percent.
states predicted tough times this year, a handful including New Jersey and
Pennsylvania is set to face hard decisions on either cutting spending or
for example, is cutting state contributions to the pensions system by 60
percent for the next two years. By the end of last year, 26 states had still
not seen overall tax revenue return to pre-recession levels, according to
recent data from Pew Charitable Trusts.
are states that are more cautious, but there is also New Jersey. There is also
Kansas, Pennsylvania," said Lucy Dadayan, a senior policy analyst at the
Rockefeller Institute of Government.
projections are more optimistic than the reality," she said. "They
either have to cut services - have to cut on the spending side - or raise taxes."
overall, states' prospects for growth in the first half of calendar 2014 are
"very, very weak," she added. "And then we'll see a very slow
this week emerged as the poster child for the issue. Governor Chris Christie
unveiled a shortfall of more than $1 billion for the budget year ending in just
six weeks. A massive drop in April income tax collections was the main culprit,
although the state has not detailed just how far below target they were.
April is the
most important month for income tax revenues because of state and federal
filing deadlines, and taxpayers writing the biggest checks tend to file at the
Part of the
drop in revenues reflects a rush to pay last year, before tax hikes took
effect. Many sold stocks, for example, to take the tax hit while
rates were relatively low. But the drop still signals that a key revenue source
for many states will be weak this year.
revenues declined by an average of 13 percent from the previous April in the 32
states for which Reuters has data. Only five states took in more year over
year: Delaware, Mississippi, Oklahoma, Oregon and Virginia.
income taxes make up a little more than a third of states' total general fund
revenue, and sales taxes comprise roughly another third. Just seven states -
Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming - collect
no income tax, and two others - New Hampshire and Tennessee - only tax dividend
and interest income, not wages.
for the full article from Reuters.