State tax revenues increased 10.8 percent in the second quarter of 2011, but revenues for local governments headed in the opposite direction.
An analysis by the Nelson A. Rockefeller Institute of Government at the University of Albany found that state tax revenues increased 8.4 percent on an annual basis for 46 states in the past fiscal year, giving them six consecutive quarters of growth and the best annual performance since 2005.
Every state except New Hampshire reported an increase in overall tax collections in the second quarter, compared to the second quarter last year. In 19 states, there were double-digit increases.
Preliminary figures for July and August indicate continued growth, though not as strong as in the second quarter. Overall collections in 41 states exhibited gains of 6.8 percent on average compared to July and August of last year.
The largest gains in the second quarter came from personal income taxes, which rose more than 16 percent compared to the second quarter of last year. It was the third straight quarter of double-digit growth, although the strong gains are not expected to continue, given the precarious state of the economy.
“In recent months, growth in tax revenues has been significantly and unsustainably stronger than growth in the economy,” wrote the study’s authors, Lucy Dadayan and Robert B. Ward. “If the economy continues to show weakness during the second half of 2011 and into early 2012, revenue growth will likely soften as well.”
On the other hand, local governments saw their tax revenues continue to fall. The second quarter saw the third consecutive quarter of declines in local property tax revenues, with the money declining by 1 percent compared to the second quarter of last year.
For the full report, visit www.rockinst.org.
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