Early indications are most states saw declines in April tax collections compared to April 2022 (April represents the largest month for tax collections due to the tax filing deadline). The revenue slowdown was expected following record gains last April resulting from, at the time, employment growth, salary increases, strong stock market performance, higher corporate profits, increased consumer spending, and the impact of inflation. The revenue declines this April were largely related to the high baseline established last year, weaker overall economic growth, and declines in capital markets. Year-over-year comparisons were also affected by tax cuts enacted last year, and tax deadline extensions in some states due to the impact of natural disasters. Personal income tax collections from non-withholding sources have driven most of the slowdown in overall revenue growth, partly due to the poor stock market performance and less capital gains and estimated tax payments. Meanwhile, the withholding component of personal income taxes remained relatively strong due to low unemployment levels. Corporate income taxes, a very volatile revenue stream, appear to be coming in above forecast for most states. Additionally, most states have continued to see increases in sales tax collections, partly related to the impact of inflation, although there are signs of slowing growth in consumer spending.
While revenue growth slowed this April, states remain in a strong overall fiscal position. Most states had at least their second-best April ever for tax collections, and revenue totals remained near historic highs. In many states April tax collections exceeded forecast since states did not project last year’s record levels would continue. Additionally, most states are still projecting to end fiscal 2023 with a surplus partly due to gains earlier in the fiscal year. Looking forward, fiscal 2024 budget proposals assume another year of slower revenue growth following double-digit percentage growth in both fiscal 2021 and fiscal 2022. Despite ongoing economic uncertainty including the current debate surrounding the debt ceiling, states remain well positioned due to actions previously taken such as building up rainy day funds to record levels, paying down long-term debt, making additional pension payments, and using one-time funds for one-time purposes.
Resources
Below is a compilation of recent press articles detailing states’ April revenue collections. In addition, please visit NASBO’s website for links to updated state revenue forecasts.
- Federal Government – Plunging Tax Revenue Accelerates Debt-Ceiling Deadline (May 14)
- National - Amid Economic Uncertainty, State Tax Revenues Decline (May 12)
- National - Slowing US State Revenues Put Spotlight on Record Rainy Day Funds (May 4)
- Arkansas - Arkansas’ general revenue in April down compared to a year ago but still above forecast (May 3)
- California - California Revenue Could Drop by $11 Billion More Than Newsom’s Forecast (May 15)
- Delaware - Delaware Panel Bumps up Revenue Forecast for This Year, Lowers Estimate for Next (May 15)
- Georgia - Georgia tax collections down sharply in April (May 9)
- Hawaii - Hawaii tax collections turned red in April (May 18)
- Idaho - Idaho’s state revenues beat April’s forecast, which could mean more money for property tax cuts (May 12)
- Illinois - State revenue drops nearly $2B in April, but budget-makers at the Capitol aren’t panicking (May 15)
- Indiana - State Revenues Fall Short of Projections For Month of April (May 14)
- Kansas - Kansas April tax collections fall short in nearly all brackets (May 1)
- Kentucky - April receipts down from 2022, but still second-best ever (May 10)
- Massachusetts - Massachusetts Tax Revenues for April Fall $2.2B Short of 2022 Mark (May 3)
- Minnesota - Minnesota April Tax Collections $134 Million Above Forecast (May 29)
- Mississippi - Revenue collections stay high in Mississippi, 3.5% over April estimate (May 8)
- Missouri - Missouri revenue collections plummet in April (May 5)
- New Jersey - State ‘well prepared’ to handle $2B dip in tax revenue, treasurer says (May 18)
- New York - For New York's budget, spending is up, but tax revenue is going down (May 17)
- North Carolina - North Carolina Coffers to Remain Flush Even With Updated Forecast That's Slightly Downward (May 11)
- Oklahoma - Oklahoma’s tax revenue dips for first time since June 2022 (May 11)
- Oregon - Kicker predicted to grow to record $5.5B as state revenue "up sharply" (May 17)
- Pennsylvania - Pa. collected $5.7B in taxes in April, new state data show (May 3)
- Tennessee - Tennessee collects $3B in taxes and fees in April (May 16)
- Texas - Sales tax revenue surpassed $4 billion in April, led by Texas oil and gas industry (May 25)
- Vermont - 'Troubling' trend for personal income tax revenues (May 24)
- West Virginia - Justice says tax collections exceeded estimates by $319 million in record-setting April (May 1)
- Wisconsin - Weaker tax revenues lead to slight dip in state surplus forecast (May 15)