According to the latest Rockefeller Institute of Government study, the first-quarter drop in state tax revenues is the steepest in 46 years.
Preliminary data for collected from 45 states indicate the second quarter will be even worse.
“The continuing sharp decline in revenues will likely force more unwanted choices for states in the months ahead,” the report authors wrote.
Adjusted for inflation and tax rates, state tax collections dropped 11.7 percent in the first three months of 2009, compared with the same period last year.
Tax revenues declined in 47 of the 50 states in the quarter, with all major sources of state tax revenue — sales taxes, personal income taxes and corporate income taxes — taking serious hits.
Personal income tax collections dropped 17.5 percent in the quarter, sales tax collections were down 8.3 percent and corporate income tax collections, fell 18.8 percent.
Western states suffered the largest declines in tax revenue,
However, local tax collections rose 3.9 percent in the first quarter, largely because of increased property tax collections, which tend to be relatively stable and which are often based on assessments of value that do not keep pace with true market conditions.
Businesses are using upcoming state tax increases scheduled to help drive back to school retail sales.
The typical family is projected to spend about $548.72 on school merchandise, an 8 percent drop from last year, according to the National Retail Federation.
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