Yesterday, the governor of Puerto Rico announced that his government’s $72 billion of debts are not payable, in advance of $1.92 billion in debt service payments due on Wednesday. This announcement follows over a year...
- The Tax Policy Blog
- States See Spring "Surge" in Income Tax Revenues
States See Spring "Surge" in Income Tax Revenues
State income tax revenues in the first quarter of 2013 soared 17 percent over 2012, according to a new collection of data released yesterday by the Rockefeller Institute. While about half of that increase is due to California's hefty income tax hike, excluding California still means an average 9 percent growth in state income taxes. By contrast, sales taxes grew 6 percent and corporate taxes 3.5 percent.
Why the spring "surge" in state income tax revenue? Part of it is the improving economy, but a big culprit is the increase in federal capital gains taxes. In late 2012, it became clear that capital gains taxes would go up for 2013, as indeed they did (from 15 percent to 20 or 23.8 percent). Lots of people "accelerated" their capital gains realizations -- sold stuff in 2012 -- to make sure that they paid 2012 tax rates rather than future, higher tax rates. Taxpayers paid those taxes this spring, leading to a huge revenue boost for the federal government (knocking hundreds of billions of dollars of the 2013 budget deficit), and flowing through to the states.
All good news, right? So long as we understand that if accelerate is indeed the cause, much of the boost is temporary. One-time sales of capital gains are exactly that: one-time. The CBO report I just linked to unnerved me a bit because they show this spring's tax revenues as a upward trend rather than a spike. States should be careful not to make that same assumption.
Here's state-by-state data. Some stories from 2012 jump out in the numbers: California's income and sales tax increases, Michigan's economic recovery and corporate tax reform, North Dakota's continued oil boom, the wild oscillation in state corporate income taxes, and income tax cuts in Oklahoma and Kansas.
Table: Percent Change in State Tax Revenues, First Quarter 2013 vs. First Quarter 2012
Source: Rockefeller Institute. NA=No Tax; ND=No Data; *=Insignificant Change.
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