U.S. states project rosier revenue as economy heats up
|04/08/2021 | 01:59pm|
CHICAGO, April 8 (Reuters) - U.S. states are pumping up their revenue forecasts amid higher tax collections that reflect improving economic conditions spurred by fiscal stimulus measures and eased coronavirus pandemic restrictions.
Revenue, which fell last year as the virus outbreak led to stay-at-home orders and other limits that sent the unemployment rate soaring, has been gaining steam even as states are set to receive a new round of federal aid.
February tax collections were nearly 16% higher than in February 2020, the month before states began taking steps to slow the virus' spread, according to an Urban Institute report based on preliminary data from 46 states.
While sales taxes were down slightly, personal income taxes jumped by 50.1% and corporate income taxes surged 65.8%. Still, total tax revenue was largely flat between March 2020 and February 2021, with 20 states reporting declines and 29 seeing growth, the report said.
Brian Sigritz, state fiscal studies director at the National Association of State Budget Officers, said a number of states have increased their fiscal 2021 and 2022 revenue forecasts.
"Reasons for these upward revisions include economic performance and recently passed federal stimulus measures," he said, pointing to federal small business loans, enhanced unemployment payments, and stimulus checks that pumped money into the economy.
However, he added that states are still projecting less revenue than they were before the pandemic.
"In some instances, tax collections have come in above forecasts that were made after the outbreak, but are still below projections made pre-pandemic," he said.
Ailing budgets were helped by last year's federal CARES Act, which allocated $150 billion to states and local governments to cover virus-related expenses. This year's $1.9 trillion American Rescue Plan sends a less-restrictive $350 billion to the governments with $195.3 billion earmarked for states.
Even without new federal stimulus aid, New Jersey is projecting ending fiscal 2021 with a record $6.4 billion budget surplus due to "revenues vastly outperforming projections," along with previous COVID-19-related federal aid and bonding, Thomas Koenig, legislative budget and finance officer told a state Senate committee on Tuesday.
The state raised nearly $4.3 billion from a November bond sale aimed at replacing lost revenue. Koenig said while the borrowing reflected defensible revenue and spending projections at that time, it was not essential to balance the current budget from "today's vantage point."
Sales-tax dependent Florida, where the tourism sector was hit hard by the pandemic, on Tuesday revised its revenue estimate for the current and next fiscal year up by just over $2 billion.
Meanwhile, President Joe Biden's proposed corporate tax changes to fund his $2 trillion-plus infrastructure plan would, if enacted, increase tax revenue for states that include international income in their corporate income tax base, according to Jared Walczak, the Tax Foundation's vice president of state projects.
He noted though that the entire corporate income tax only accounts for about 5% of tax revenue in most states. (Reporting By Karen Pierog Editing by Marguerita Choy)