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U.S. State Revenue Rises 6.8% in July-August, Study Finds

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Oct. 26 (Bloomberg) -- U.S. state tax collections are heading for their seventh-straight quarter of growth, according to preliminary data released today by the Nelson A. Rockefeller Institute of Government.

The Albany, New York-based institute said collections rose 6.8 percent in July and August, the first two months of the third quarter, compared with the same period in 2010. In the second quarter, revenue grew by 10.8 percent, marking the sixth-straight period of growth, the institute said. For the fiscal year ended June 30, which 46 states use, revenue rose by 8.4 percent, the biggest annual gain since 2005.

Even with the gains, collections remained lower in the second quarter than four years earlier, and projections are for weaker growth in the next fiscal year, the institute said. States are being pressured by a faltering housing market and weak consumer confidence, said the authors of the study, Lucy Dadayan and Robert B. Ward.

“In recent months, growth in tax revenues has been significantly and unsustainably stronger than growth in the economy,” they wrote. “If the economy continues to show weakness during the second half of 2011 and into early 2012, revenue growth will likely soften as well.”

State collections of personal income taxes jumped 16 percent in the second quarter over the same period last year, the third-straight quarter of double-digit growth, the study found.

To contact the reporter on this story: Andrea Riquier in New York at ariquier@bloomberg.net.

To contact the editor responsible for this story: Mark Schoifet at mschoifet@bloomberg.net

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