TLP: Watch Out for 'Good News'
So, it this what recovery looks like?
State tax revenue rose in the second quarter, as higher taxes and the slowly improving economy led to an increase in collections.OK, maybe not. Federal statistics continue to show declining expenditures and increasing layoffs by state and local governments — 48,000 jobs were lost in July, according to the Labor Department, and a total of 169,000 for the year.
Overall tax revenue increased 2.2% in 47 states that have reported their receipts for the three months ended June 30, compared with the same period a year ago, according to a report to be released Monday by the Nelson A. Rockefeller Institute of Government at the State University of New York.
This marks the second quarter in a row of recovering tax collections—and follows five quarters of declines in revenue that hammered local-government budgets. The latest figures are still a mixed bag: Some states continue to see declining revenue, but those were offset by states that saw increases.
States continue to face financial pressure, in part because tax collections remain below the levels of two years ago. In addition, aid to state income provided by federal stimulus funds is starting to fall away. Signs that the economy is flagging add to the gloomy outlook for state coffers.
"Most states still show a mismatch between revenue and spending trend lines," said Robert B. Ward, deputy director of the Rockefeller Institute. "It's not time to put away the red ink yet."
Recent federal legislation provides $26 billion in assistance for states and school districts, but the schools have been slow to pull the spending trigger. The WSJ reports that economists think the local government budgets will be a drag on growth through next year. The key, economist Nigel Gault of IHS Global Insight, is cutting expenses. Uh huh.
And even though the revenues are increasing, guess why? More from the WSJ:
The second-quarter gains were driven by growth in sales and income taxes, both of which have been raised in many states. Second-quarter sales-tax revenue increased 5.9% in the 47 states surveyed by the Rockefeller Institute, while the take from personal income taxes grew 1.6%. Collections from corporate income taxes, which tend to be volatile and are just a small slice of most states' collections, fell nearly 19% over the period.Yeah, "slowly improving" would be the way to say it.
Some 30 states saw tax revenue in the second quarter rise from a year earlier. Many of the strongest performers were places where collections were hard-hit by the recession. Florida saw a nearly 14% increase. Arizona — which, like Florida, has been among the states most affected by falling real-estate prices and lackluster construction activity — saw a 3.9% increase.
Still, revenue declined in several big states. In California, tax revenue declined 0.9%, despite a nearly 12% increase in income-tax collections largely driven by higher taxes, according to the Rockefeller Institute. Illinois saw revenue decline 7%, while Michigan's collections fell 3.8%.