Half of all U.S. states have returned to peak tax-collection levels last seen before the recession five years ago, or will soon, according to a survey by the National Conference of State Legislatures.
Twelve states project their personal income-tax collections will exceed what they budgeted for the current fiscal year, while 15 states say they will come in on target, the NCLS said. Collections of sales levies also are expected to exceed or meet estimates in 28 states.
States have closed more than $500 billion of budget deficits over the last four years by raising taxes, cutting jobs and curbing spending, all of which acted as a drag on the economic recovery. The longest recession since the Great Depression began in December 2007 and lasted until June 2009. In the preceding two recessions, it took two years or less for revenue to return to previous peaks, NCLS said.
“Three and a half years following the official end of the recession, state officials face the prospect that slow and steady growth may be the ’new normal,’” NCLS said in the report. “With the unpredictability of recent fiscal years, stable is not necessarily a bad position for states, but enough uncertainty lingers on the horizon to create a fragile situation for state budgets.”
Corporate income-tax revenue, which account for about 5 percent of state collections, is expected to exceed or match budget estimates in 32 states, NCLS said.
In California, higher sales and income taxes approved by voters in November have put the most populous U.S. state on track to recording a surplus by 2015. The state has suffered through $200 billion in combined shortfalls in the last 12 years, according to the nonpartisan Legislative Analyst’s Office.