Wednesday, December 7, 2011

State Tax Revenue increased nominally, flat in real terms as of 3Q 2011

- by New Deal democrat

With the temporary lull in dramatic (US) economic direction, I have been updating a number of metrics I haven't looked at in awhile. Two weeks ago, I looked at leading indicators for jobs. Last week I examined real wages and the savings rate.

This week I'm revisiting state tax receipts. These lag the economy, and reports on state tax receipts badly lag even that. Because I knew they would turn up after the other data already had, I used to pillory Mish about sales tax receipts in particular. Needless to say, Mish, who used to religiously report these, stopped after they unequivocally turned against him. With last summer's near stall, however, in real terms these seem to have stalled as well as of the most recent (summer) reported data.

The Census Bureau has reported on state and local tax revenue collected in the second calendar quarter of 2011, and the Rockefeller Institute has also reported on preliminary collections from the third quarter.

According to the Rockefeller Institute report:
State tax revenues grew by 10.8 percent in the second quarter of 2011, and by 8.4 percent annually for the period that ended the fiscal year for 46 states -- marking six straight quarters of growth and the strongest annual gains since 2005, ....

[E]very state but one (New Hampshire) reported an increase in overall tax collections compared to the year-ago period ....

[Further, p]reliminary figures for July and August 2011 suggest continued, though less robust, growth in revenues. Overall collections in 41 early-reporting states showed average gains of 6.8 percent compared to the same months of 2010.

Even for states, the longer term revenue picture remains mixed. Despite the recent gains, states' tax revenues remained lower in the second quarter than they were four years earlier.
Local governments, which rely heavily on property tax payments, are in worsening shape:
Tax collections for local governments, meanwhile, have headed in the opposite direction. The second quarter of 2011 marked the third consecutive quarter of declines in local property tax revenues. In total, local property taxes declined by 1 percent in the second quarter of 2011 compared to the same quarter of 2010.
Here is an updated graph of state tax revenues, seasonally adjusting by .775 for the second quarter (which includes April 15), beginning with the first fiscal quarter of 2008 (or the third calendar quarter of 2007) :

Fiscal QuarterRevenues* ($ billions)Inflation- adjusted Revenues% off of peak
1Q 2008176.4183.8-1.5%
2Q 2008178.7183.6-1.6%
3Q 2008181.4184.6-1.1%
4Q 2008240.8 (186.6)186.60
1Q 2009181.2179.9-3.6%
2Q 2009171.4176.2-5.6%
3Q 2009159.2162.7-12.8%
4Q 2009201.4 (156.1)158.1 - 15.3%
1Q 2010161.4162.4- 13.0%
2Q 2010166.1166.2- 10.9%
3Q 2010164.5 164.2- 12.0%
4Q 2010205.3 (159.1)159.4- 14.6%
1Q 2011168.7167.8- 10.1%
2Q 2011178.8175.6- 5.9%
3Q 2011180.2174.6- 6.4%
4Q 2011226.0(175.2)167.8-10.1%
1Q 2012180.2 (p*)171.6 (p*)-8.1%(p)*


In summary, while in nominal terms state tax revenues have made back all but less than 4% of their entire shortfall off peak pre-recession revenues, measured in real terms they have stalled in the last several quarters. Meanwhile population has increased, and states have been facing record unemployment payouts. As I've said before, while there has been strong improvement, it still hasn't been enough.

Even worse, local governments, which rely on property taxes, are suffering from decreased revenues as well as decreased aid from the states.

If ECRI's prediction of another recession in the immediate future does turn out to be true, it is going to be brutal for state and local governments.