Fear of federal taxes pushes state collections up

U.S. states took in 6.1 percent more revenue in fiscal 2013 than they did the year before for a record $846.2 billion, according to the Census Bureau.

It was the third consecutive increase, the agency said in a statement today. Revenue rose 4.7 percent from 2011 to 2012, and 7.3 percent from 2010 to 2011.

The data show states’ financial improvement after the 18-month recession that ended in 2009. The figures reflect higher income-tax collections resulting from strong financial markets and an incentive for taxpayers to take profits before higher federal tax rates began, said Donald Boyd, a senior fellow at the Albany, New York-based Nelson A. Rockefeller Institute of Government, which conducts public policy research.

“The financial markets and the federal government, in an unintentional way, were very good to states in 2013,” Mr. Boyd said. “States benefited from a surge in income-tax collections that had very little to do with the overall economy.”

Revenue increased in all states except Alaska and Wyoming, where tax receipts from natural resources declined, according to the Census Bureau. States with the largest percentage increases were North Dakota, California, Hawaii and Colorado.

INCOME LEVIES

Collections on individual income levies rose 10.3 percent to $309.6 billion in 2013, and sales taxes increased 3.9 percent to $254.7 billion, according to the Census Bureau.

Mr. Boyd said the recovering economy would help states in the long term.

“We’d expect continued increases in tax collections, just not as robust,” Mr. Boyd said.

The turnaround comes two years after 31 states faced collective deficits of $55 billion, according to the Center on Budget and Policy Priorities, a Washington-based research group that examines the effects of fiscal policies on low-income Americans.

State securities this year are earning 2.7 percent, lagging behind the $3.7 trillion market’s return of 3.8 percent, according to S&P indexes.

(Bloomberg News)