March 27 U.S. states are reducing their tax
revenue forecasts due to concerns over a projected slump in
economic growth, low oil prices, possible federal tax cuts and
other factors, according to an analysis released on Monday.
The Rockefeller Institute of Government, the public policy
research arm of the State University of New York, said while the
revised forecasts varied, states generally anticipate continued
sluggish growth for their two biggest revenue sources: income
and sales taxes. That will squeeze already-tight state budgets.
"States will have to find a way to raise revenue or cut
spending," said Lucy Dadayan, one of the study's authors.
For fiscal 2017, which in most states began on July 1, the
median income tax growth rate slipped to 3.6 percent from 4
percent, while the rate for sales taxes fell to 3.1 percent from
In fiscal 2018, states forecasted slight increases over
fiscal 2017 with the median growth rate for income taxes at 4.1
percent and sales taxes at 3.5 percent.
"In general, forecasted growth both for income tax and sales
tax is much slower than historical growth rates, which averaged
around 7 percent between 1981 and 2007, right before the start
of the Great Recession," the analysis said.
It also said federal tax cuts promised by President Donald
Trump's administration gave taxpayers the incentive to push
income out of 2016 and into 2017 to take advantage of
prospective lower rates. As a result, fiscal 2017 income tax
collections based on 2016 income could decrease, while fiscal
2018 collections based on 2017 income could increase.
"The most recent analysis from the Congressional Budget
Office estimated a 10.4 percent decline in capital gains in
2016, despite the strong stock market, followed by an 11
percent bounce-back in 2017," the Rockefeller Institute analysis
(Reporting by Karen Pierog in Chicago; Editing by Matthew