US Tax Revenues Continue to Fall

February 24, 2010 Taxation in USA

Income taxUS tax authorities have seen a fifth consecutive quarter of declining tax revenues, with the October-December period registering a 4.1 percent fall in national collections.

According to the Rockerfeller Institute’s State Revenue Flash Report, released February 23rd, the US is experiencing continued drops in all three major tax sources. The report claimed that amongst the 46 states which had made their data for the period already available, the total tax collections for the October-December quarter equaled USD134.5 billion, compared to USD140.2 in the same period of 2008. If inflation is taken into account, the tax revenue drop rises to 4.8 percent. Corporate income taxes experienced the most significant decline with a 5.8 percent drop across all states, followed by a 4.5 decrease percent in personal income taxes, and a 4.2 percent decrease in sales taxes. Although each taxation area is seeing a decrease when compared to last year, the current drops are more positive then those of the previous three quarters.

The report shows that Arkansas, California, Massachusetts, New Hampshire, North Carolina, South Dakota, and Wisconsin were the only states to see increases in total tax collections. North Carolina saw the largest increase in total tax revenues, with 11.4 percent, followed by South Dakota at 6.6 percent. Conversely, Oklahoma experienced the sharpest revenue declines, falling by 26.9 percent, followed by Arizona at 17.1 percent. Across all the states, corporate tax revenue was the most volatile revenue source, with North Carolina and Connecticut reporting increases of 458.5 percent and 299.1 percent respectively, and Hawaii and South Carolina showing drops of 413.3 percent and 201.3 percent.

Projections made within the Rockerfeller Institute report claim that tax revenues will continue to fall in the first quarter of 2010, with a strong possibility of drops in the future. Further, it was claimed that any tax revenue increases seen in the period were a product of legislative adjustments and not a sign of an economic recovery.

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