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U.S. State 2nd Quarter Tax Revenue Rises 11.4%, Rockefeller Institute Says

U.S. state tax revenue grew at its fastest pace in six years in the second quarter, led by personal and corporate levies, as governments begin to recover from the longest recession since World War II.

Revenue rose 11.4 percent from the same three months a year earlier, according to a report today by the Nelson A. Rockefeller Institute of Government, which collected preliminary data from 46 states. Revenue is still 7.8 percent lower than the April-June period three years ago, the report said.

The gains were aided by temporary tax increases, one-time fees and a low collection rate from which to improve, said Lucy Dadayan, an analyst at the Albany, New York-based institute.

“Fiscal pressures are easing,” she said in a telephone interview. “But the long-term challenges are still there since most states took temporary solutions during the recession to generate revenue.”

U.S. states, which closed combined projected budget deficits of $430 billion over the past three years, face an additional $103 billion gap this year, according to a June 17 report from the Washington-based Center on Budget and Policy Priorities.

Drag on Growth

Cuts in state and local government spending reduced U.S. growth by 0.34 percentage point in the second quarter, after slowing expansion by 0.23 percentage point in 2010 and 0.11 percentage point in 2009, the Commerce Department said in its most recent estimate of second-quarter growth.

Second-quarter personal-income and corporate-tax revenue rose by 16.5 percent each, while sales taxes rose 5.9 percent, the Rockefeller report said. Alaska, North Dakota, Illinois, Nebraska and New York had the steepest total tax increases, all exceeding 20 percent, according to the report.

New Hampshire was the only state where tax collections decreased, the report found.

To contact the reporter on this story: Simone Baribeau in Miami at sbaribeau@bloomberg.net.

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net.

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