Study: Thanks in part to federal stimulus, Illinois tax revenues recovered by end of 2020

[August 11, 2021]  By Kevin Bessler

(The Center Square) – Illinois’ tax revenues have largely recovered from the massive jolt brought on by the COVID-19 pandemic.

According to Pew Charitable Trusts, COVID-19 vaccinations, an easing of public health restrictions and nearly $2 trillion in federal aid helped get states' economies going again.

“When you and I received the stimulus checks, we more than likely spent some of it so we more than likely paid sales taxes,” Pew expert Justin Theal said.

The bounce back started late in 2020, when by the end of the year states overall had mostly recovered from historic revenue declines in the first half, to reach just 1.9% below pre-pandemic levels by year end. Three quarters of states posted year-over-year gains in the final quarter of 2020, including Illinois at 2.3%.

Several factors are being attributed to the better-than-expected outcome, including Illinois’ high-income workers, who were able to continue to work from home and thus generate income tax revenue for the state.

“The different public health restrictions that each state implemented to curb the spread of the virus were also a factor,” Theal said.

Illinois was able to continue to collect sales taxes from online companies as consumers shifted their buying patterns. Illinois had historically relied on the buyer to remit taxes, something that was regularly ignored. Illinois and others then changed course and began requiring retailers to collect sales taxes, putting the onus on them to remit the tax.

Businesses also received loans and other forms of assistance to continue during shutdown orders, keeping employees on the payroll and paying taxes. The federal enhanced unemployment benefits have been cut short in about half the states, but not in Illinois. That program will end early next month.
 

According to the Pew analysis, the recovery played out differently among the states. Overall, at the end of 2020, 20 states had higher tax receipts than in 2019, with Idaho leading the way with an 11.2% increase.

Alaska saw the greatest decline at 34.4%, caused partly by a slump in energy severance taxes. The state doesn’t have a general sales or personal income tax. Other states that saw some of the biggest declines were North Dakota at 25.7% and Hawaii at 15.2%.