State Tax Revenues Declined In First Quarter; Local Tax Receipts Were Higher

As the Nelson A. Rockefeller Institute of Government has predicted for almost two years, the front-loading impact of taxpayers moving capital gains and dividends into 2012 in anticipation of the so-called fiscal cliff tax hikes has created a tax collection trough for state governments. Overall state tax collections fell 0.3% in the first quarter, compared with the same quarter last year. It is the first quarter state tax receipts have declined since the bottom of the recession in 2009. The group also reported that preliminary data show that the decline in tax revenues is likely to continue into the second quarter.

The state revenue decline was almost completely because of a 1.2% drop in collections for personal-income taxes tied to capital gains. State sales-tax revenues also slowed but remained positive.

Local tax revenues rose modestly, up 1.9%. Both local sales-tax receipts and revenues from property taxes rose. It was the eighth consecutive quarter of increases in local tax receipts.

State and local tax revenues help fund capital projects in noncommercial foodservice segments, such as schools and public healthcare and corrections facilities. The complete report, including state-by-state trend data, is available at rockinst.org. “””