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 This April, personal income tax (PIT) revenue fell by an average of
9.88 percent compared to the same month last year in the 32 U.S.
states and Puerto Rico for which Reuters has data.
Taxes on wages and investment income are a top revenue source for
the 43 states that collect it. April is the most important revenue
month because it contains the tax filing deadline and the tendency
of taxpayers who owe money to wait until the last minute to pay.
Personal income taxes make up slightly more than a third of states'
total general fund revenue, and sales taxes comprise roughly another
third.
Collections have been volatile in recent years, including 2013's
"April Surprise," which delivered unexpectedly high revenues to
states as taxpayers sold investments to dodge an increase in federal
taxes.
Collections plunged in April 2014 then rebounded last year with the
help of a robust stock market.
In 2015, the U.S. benchmark S&P 500 stock index lost 0.7 percent
compared with a 11.4 percent gain in 2014.
"The kinds of income that are kind of driving this are particularly
capital gains related to the stock market. If you had to find a No.
1 culprit, that's it," said Don Boyd, Director of Fiscal Studies at
the Rockefeller Institute of Government in Albany, New York.
News of falling revenue comes as most states are nearing the end of
fiscal 2016 and the beginning of fiscal 2017, leading some to turn
to temporary measures to plug budget holes, Boyd said.
John Hicks, executive director of the National Association of State
Budget Officers in Washington, said the 20 percent growth rate in
the tax in April 2015 from a year earlier set "an extremely high
bar."
He said that PIT withholding has been more stable for states than
capital gains-related tax revenue.
"The underlying personal income information - even while we've been
bouncing for the last few years - has still been on a slow, but
increasing trend," Hicks added.
MOST STATES SEE COLLECTIONS DECREASE
Louisiana had the most dramatic drop at 81.5 percent. The plunge was
due to a change in the way Louisiana issues refunds as well as a
fall in withholding collections because the last day of April fell
on a Saturday.
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This resulted in some revenue payments being deposited in May, according to
Kizzy Payton, press secretary for the Louisiana Department of Revenue.
Louisiana - like North Dakota, where PIT collections fell 34.7 percent - is also
feeling the sting from the struggling energy sector. Oklahoma, another key
energy producing state, experienced an 18 percent drop in revenue in April.
New Jersey's PIT revenue was down 14.8 percent, largely due to a decline in
taxpayers' investment income and the state's tax structure, which relies on
wealthy residents.
Oregon's receipts came in a third lower than last year, mainly because excess
state revenue during the previous year led to a surplus income tax credit on
2015 returns, said Bob Estabrook, spokesperson for the Oregon Department of
Revenue.
Lower income tax rates led to revenue drops in Illinois, down 28.8 percent, and
in Ohio, down 41.3 percent. But in Kansas, which slashed rates in 2013, revenue
was up 23 percent.
Seven states - Alaska, Florida, Nevada, South Dakota, Texas, Washington and
Wyoming - collect no income tax, and two - New Hampshire and Tennessee - only
levy taxes on dividend and interest income, but not wages.
(Reporting by Karen Pierog; additional reporting by Hilary Russ, Robin Respaut,
Rory Carroll and Edward Krudy; editing by Daniel Bases and G Crosse)
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