The recession is taking an even greater toll on state tax revenues than expected. According to results tabulated by economist Steven D. Gold of the Center for the Study of the States at the State University of New York at Albany, the total tax take of the 49 states reporting to the center was up only 0.9% in the first quarter over its year-ago level--a drop of more than 4% adjusted for inflation. Without tax increases passed last year, Gold estimates, total tax revenues would have been down 1.3%.
Even with recent tax hikes, revenues from sales taxes--the largest source of funds for most states--were off 2.1% in the first quarter. And corporate income taxes declined 7.9%. The shortfall is increasing the pressure on the states to meet balanced-budget requirements by raising taxes and curtailing spending. According to the Commerce Dept., real outlays on goods and services by state and local governments fell at a 0.3% annual rate in the first quarter.