States’ Tax Revenue Solid in Early 2006

State tax collections rebounded from a slight downturn in late 2005 and saw solid growth in the first three months of 2006, according to a new report that shows 16 states with double-digit revenue growth.

The results released by the State University of New York’s Nelson A. Rockefeller Institute of Government are the latest in a series of recent reports that indicate states’ finances are relatively stable after state governments weathered their worst financial crisis since the Great Depression in the early part of this decade. A report June 13 from the National Governors Association and the National Association of State Budget Officers found strong revenue growth and a 7.6 percent increase in state spending.

The Rockefeller Institute said state tax revenue totaled $146.6 billion in the January-March 2006 period, up 6.8 percent from the same period in 2005. That overall figure would be much higher – 8.9 percent – if California had not offered a corporate tax amnesty last year, the institute said.
State treasuries in the far West region also would have had the strongest revenue growth (13 percent) without the California program. The Southeast recorded a 10.5 percent increase in tax revenue growth, followed by the Southwest (9.3 percent). The Great Lakes region again showed the weakest state revenue growth (5 percent). The 14-page report features state-by-state lists of personal, corporate and sales tax revenue for fiscal years 2005 and 2006.

All three major sources of tax revenue registered increases this quarter. Personal income tax collections grew 10.7 percent in the January-March quarter compared to the same quarter the year before and was nearly double the previous quarter’s 5.7 percent increase. Meanwhile, sales tax collections were up 6.5 percent compared to a year ago, slightly more than last quarter’s 5.5 percent growth. Overall corporate income tax revenue showed a 13.7 percent decrease in the first quarter compared to last year, but without the California tax amnesty program, the growth was 12.5 percent, similar to gains seen in the last two quarters.