State Revenues Take a Hit

Income tax collections are down in several states compared to a year ago. Some worry it's a sign of things to come.



  • Every state in a Governing analysis, except Indiana, saw a December drop compared with a year ago.
  • States with high-income earners suffered the most, reporting double-digit drops in total tax collections.
  • The dip wasn't a complete surprise following a surge last year in revenues thanks to changes to income taxes and deductions under 2017's federal tax overhaul.
State tax collections took a dive in December compared to the same month a year ago. Observers are worried the dip could indicate more uncertain economic times ahead.

Lower income tax collections is the culprit, according to data compiled by Governing of the top 10 most populous states with an income tax and with recent data available. Every state except Indiana saw a December drop compared with a year ago, ranging from -3.4 percent in Ohio to -41 percent in California.

States with high-income earners suffered the most, reporting double-digit drops in total tax collections. California saw the biggest dip, followed by New York, Massachusetts and New Jersey.

But even low-tax states felt the pinch. Georgia and Virginia both saw single-digit drops.



State December 2018 Tax Receipts (in billions) Total Tax Collections Change from December 2017 Income Tax Collections Change from December 2017 Total Collected Year-to-Date (in billions) Total Collected YTD Compared to Prior Year
California $10.66 -34.4% -41.2% $55.63 1.7%
New York $7.37 -25.5% -39.4% $51.7 -1.7%
New Jersey $2.79 -10.0% -35.2% $12.9 2%
Massachusetts $2.57 -14.6% -26.4% $13.31 3%
Virginia $1.8 -5.9% -12.5% $7 0.7%
Pennsylvania $2.8 0.8% -11.1% $14.9 6.7%
Georgia $2.16 -4.5% -9.3% $11.8 4.6%
North Carolina $1.93 -0.93% -3.0% $10.9 4.5%
Ohio $1.83 0.9% -3.4% $11.3 5%
Indiana $1.85 9.6% 7.1% $10 6.5%
SOURCE: Governing calculations state tax and revenue monthly reports for top 10 most populous states that have a general income tax and have December data available
To a large degree, the dive was expected. Thanks to changes to income taxes and deductions under last year's federal tax overhaul, thousands of taxpayers rushed to file income and property taxes in December 2017, creating an abnormal boost in revenue.

But the declines of this year were steeper than last year's gains, says Lucy Dadayan, a senior research associate at the Urban Institute. “We might continue seeing weak growth in income tax revenues, particularly in these higher tax states, for the rest of the fiscal year.”

While tax revenue nationwide through December is averaging 2.4 percent higher than last year, says Dadayan, income tax collections show a 1.6 percent drop. California and New York are two key states to watch going forward, she says, as they account for up to 40 percent of the nation’s income tax revenue in any given year.

New York's fiscal year closes Mar. 31. Its total tax collections are currently down for the year, and the state comptroller has estimated that the state will close 1.8 percent below fiscal 2017.

California is still ahead of last year’s revenue total, but it’s falling more than 4 percent behind on what it had expected to collect for the year. According to an analysis by Moody’s Investors Service, it needs about $20 billion to come in this month to get back on target.

"The current economic expansion has been beneficial for the state’s coffers,” Moody’s analyst Matthew Butler recently wrote. “However, stock market performance has weakened and a prolonged slump in the stock market would be a significantly negative factor for state revenue going forward.”

This appears in the Finance newsletter. Subscribe for free.

*CORRECTION: A previous version of this mistakenly reported that California and New York account for half of the nation’s income tax revenue. It's actually closer to 40 percent. It also incorrectly stated the amount of New York's tax receipts in December 2018.

Liz Farmer is a former GOVERNING fiscal policy writer.
Special Projects
Sponsored Stories
Creating meaningful citizen experiences in a post-COVID world requires embracing digital initiatives like secure and ethical data sharing, artificial intelligence and more.
GHD identified four themes critical for municipalities to address to reach net-zero by 2050. Will you be ready?
As more state and local jurisdictions have placed a priority on creating sustainable and resilient communities, many have set strong targets to reduce the energy use and greenhouse gases (GHGs) associated with commercial and residential buildings.
As more people get vaccinated and states begin to roll back some of the restrictions put in place due to the COVID-19 pandemic — schools, agencies and workplaces are working on a plan on how to safely return to normal.
The solutions will be a permanent part of government even after the pandemic is over.
See simple ways agencies can improve the citizen engagement experience and make online work environments safer without busting the budget.
Whether your agency is already a well-oiled DevOps machine, or whether you’re just in the beginning stages of adopting a new software development methodology, one thing is certain: The security of your product is a top-of-mind concern.
The World Economic Forum predicts that by 2022, over half of the workforce will require significant reskilling or upskilling to do their jobs—and this data was published prior to the pandemic.
Part math problem and part unrealized social impact, recycling is at a tipping point. While there are critical system improvements to be made, in the end, success depends on millions of small decisions and actions by people.