Overall government tax collections for states increased 8.9 percent to nearly $764 billion, the U.S. Census Bureau reported yesterday (April 12). That's a big change from previous years. In the aftermath of the recession, states took in $14 billion less in 2010 and nearly $66 billion less in 2009.
Nine states, mostly the energy-rich ones, saw tax collections go up by double-digits in 2011. North Dakota, which has the nation's lowest unemployment rate, experienced the largest uptick in tax collections: 44.5 percent.
The other states seeing tax collection go up by more than 10 percent were Alaska (22.4 percent); California (17.4 percent); Illinois (15.3 percent); New Mexico (15.1 percent); Wyoming (14.1 percent); Idaho (10.5 percent); Colorado (10.4 percent) and Minnesota (10.1 percent). The figures come from the bureau's data on state tax collections for the year ending June 30, 2011.
The total state tax take of $764 billion is second highest only to the peak of $781 billion reached in 2008, writes Joseph D. Henchman, vice president of legal and state projects at the Tax Foundation. “The trends are what you would expect during an economic recovery,” he says. Individual income and sales taxes are rising rapidly as income and consumer spending rise, Henchman explains. Meanwhile, property tax collections are dropping as assessments catch up with depressed valuations from the housing crash.
Despite the growth in tax collections in 2011, “states have long way to go for a full fiscal recovery,” says Lucy Dadayan, a senior policy analyst at the Rockefeller Institute of Government, who tracks state revenue every quarter. She says that at the end of 2011, only 17 states reported higher collections in total taxes compared to their peak levels, while 33 states reported lower collections. She expects less growth in state collections next year.
Mike Leachman, director of state fiscal research for the Center on Budget and Policy Priorities, says despite the gains state revenues are still 7 percent below pre-recession levels after adjusting for inflation. “States,” he says, “are still in a deep hole.”
For additional coverage, see The Washington Post's analysis.