Last Thursday, the Census Bureau released its annual report on state government taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. collections, showing that state government revenues from taxes increased 6.1 percent between 2012 and 2013. This marks the third consecutive year that collections have increased since the recessionA recession is a significant and sustained decline in the economy. Typically, a recession lasts longer than six months, but recovery from a recession can take a few years. – for a total 18.6 percent increase in nominal terms since 2009.


(from Census Bureau report)
Despite claims of state revenue shortages since the recession, steadily increasing revenues have nearly pushed total state collections back to pre-recession levels. After adjusting for inflationInflation is when the general price of goods and services increases across the economy, reducing the purchasing power of a currency and the value of certain assets. The same paycheck covers less goods, services, and bills. It is sometimes referred to as a “hidden tax,” as it leaves taxpayers less well-off due to higher costs and “bracket creep,” while increasing the government’s spending power. , the difference between collections at the peak of the bubble and current collections is only about 2 percent.


(from Census Bureau report)
While total state revenues dropped in 2009, collections from property and license taxes increased by 2.5 percent and 0.16 percent respectively. “Other” taxes increased by 24.6 percent. However, because these three tax categories only make up about 10 percent of total state collections, their stability has little impact on the stability of total tax revenues for states.
The sales tax is typically more insulated from fluctuations in the economy. Since 2007, the standard deviation of year-to-year percent change for income taxes was 8.9 percent compared to sales taxes at only 3.8 percent. This relative stability was confirmed during the recession: between 2008 and 2009, sales tax collections only decreased 4.5 percent, compared to an 11.5 percent drop in revenues from individual income taxAn individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment. Though barely 100 years old, individual income taxes are the largest source of tax revenue in the U.S. es and a 21.2 percent drop in revenue from corporate income taxA corporate income tax (CIT) is levied by federal and state governments on business profits. Many companies are not subject to the CIT because they are taxed as pass-through businesses, with income reportable under the individual income tax. es.

