New Report from Rockefeller Institute Paints Bleak State Revenue Picture with 2nd Quarter Data

October 15, 2009

A new report on state tax collections is another tale of plummeting revenue. The Rockefeller Institute’s new report is profiled by the AP’s Glen Johnson.

Thursday’s report by the Rockefeller Institute of Government showed second-quarter tax revenues in the 50 states dropped a record 16.6 percent, or $200 billion. … Thirty-six states reported double-digit declines. … And the easy budget cuts have already been made.

All that is bad news for governors and state legislators who have been reluctant to cut deeper for fear of angering constituents.

Tax Foundation’s Joseph Henchman told the AP why states had relied mostly on rainy day funds, superficial budget cuts, and targeted tax hikes on high-income people or smokers:

“[Legislators] want to be able to hold to the [spending] commitments they have made, so they hold onto optimistic tax forecasts. That leads to revenue shortfalls when the reality hits.”

Henchman wrote in a report last February that states could more fundamentally reform their tax systems to achieve more stable revenue flow.

The lower-than-expected tax receipts were for the second quarter, from April 1 through the end of most states’ fiscal year on June 30. Tax Foundation analysts Mark Robyn and Kail Padgitt summarized the major tax changes that states enacted as the 2009 fiscal year was winding down.

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