Back 

Projected Tax Growth in FY 2013

NCSL Fiscal Brief: Projected State Tax Growth in FY 2013

Contents

More infomation

  • The PDF version of the full report  includes long-term tax forecasts and appendices.

PDF Download the full report (10 pages)

NCSL Contact

JW Player goes here
Sept. 25, 2012

Fiscal year (FY) 2013 marks the third consecutive year that state officials are forecasting state tax growth compared with the previous fiscal year. Despite this positive development, the robust return of state tax collections that typified previous economic recoveries remains elusive. According to the Nelson A. Rockefeller Institute of Government, following five quarters of declines brought on by the Great Recession, total state tax collections have risen for 10  consecutive quarters (since the first quarter of 2010). Growth, however, has slowed in the last four.[1] Overall, the state revenue situation continues to improve, albeit at a leisurely pace.

Projections for FY 2013 reflect this slow growth trend as officials in nearly three-fourths of the states and the District of Columbia anticipate total tax growth between 1 percent and 4.9 percent. Only two states—Georgia and Oklahoma—have forecast tax growth of more than 5 percent for all of the three major categories—personal income, general sales and use and corporate income—this fiscal year. Also playing a role in the modest projections for FY 2013 is that 2012 has been a quiet year for notable state tax changes, which largely affect collections in FY 2013. So far, 2012 features the smallest aggregate tax cut (0.2 percent) in NCSL’s 32-year history of collecting this data.[2]

This brief presents a summary of the projected growth for state total, personal income, sales, corporate income and other taxes compared with FY 2012 estimated collections. This brief is based on a survey of legislative fiscal directors in 50 states and the District of Columbia in the summer of 2012.[3]
 

 

Total Tax Forecasts for FY 2013

 Forty-five states and the District of Columbia expect total tax collections in FY 2013 to be higher than they were in FY 2012.

    • Nine states expect total tax collections to grow at least 5 percent above FY 2012 levels. The largest increases are projected in California (10 percent) and Delaware (10 percent). The increase in California is subject to the passage of three separate ballot measures. Two of them, including one initiated by Governor Jerry Brown, would result in large broad-based tax increases and up to $10 billion in new revenues, while the third would cut business taxes. Delaware’s growth is attributed to declines in corporate income and abandoned property collections—historically considered volatile revenue sources—in FY 2012 that effectively reduced the base.
    • Thirty-six states and the District of Columbia project total tax collections to grow between 1 percent (South Carolina) and 4.8 percent (Iowa).
    • Texas (0.4 percent) and Wyoming (-0.6 percent) expect collections to be essentially flat.
    • Only Alaska (-17.9 percent) and Kansas (-3.6 percent) anticipate FY 2013 total tax collections to decline by at least 1 percent compared with FY 2012. In Alaska, the falling price of oil is the primary driver of the decline. Kansas enacted tax policy changes that reduce state income taxes by an estimated $249.2 million in FY 2013.

The performance of total state collections is based on the performance of combined individual tax categories. The following sections summarize expectations for major state tax sources.


Personal Income Tax Forecasts for FY 2013

Table 1. Personal Income Tax Collections
(FY 2013 Compared with FY 2012)
Projected Change Number of Jurisdictions
>5% 14
1.1% to 5% 24
Flat (-1% to 1%) 1
-1.1% or less 2
Do not levy 7
Not Available Hawaii, Montana and New Hampshire.

Personal income taxes represent the largest share of state tax collections, accounting for approximately 34 percent of the total.[4] Forty-one states levy a broad-based personal income tax and two others—New Hampshire and Tennessee—levy a limited tax. Of these 43 states, 41 provided a personal income tax forecast for FY 2013.[5]

  • Fourteen states project personal income tax collections to rise by at least 5 percent in FY 2013 (see Table 1). Of these, only California (14 percent) is forecasting growth by more than 10 percent, which is contingent upon passage of a tax initiative on the November ballot.
  • Twenty-four states expect personal income tax collections to rise between 2 percent (West Virginia) and 4.8 percent (Ohio).
  • Officials in Maine (-0.6 percent) anticipate essentially flat personal income tax growth.
  • Kansas (-2.8 percent) and the District of Columbia (-2.8 percent) expect personal income tax collections to fall in FY 2013 compared with FY 2012.

 

General Sales Tax Forecasts for FY 2013

Table 2. Sales Tax Collections
(FY 2013 Compared with FY 2012)
Projected Change Number of Jurisdictions
>5% 6
1.1% to 5% 35
Flat (-1% to 1%) 3
-1.1% or less 1
Do not levy 5
Not Available Hawaii

Sales taxes account for approximately 31 percent of total state taxes—slightly less than personal income taxes. Forty-five states levy this tax, and 43 provided information on its expected performance for FY 2013.

  • Six states forecast that sales tax collections will exceed last year’s levels by 5 percent or more, with only one state, Oklahoma (10.1 percent) projecting growth greater than 10 percent (see Table 2). Officials in Oklahoma commented that they will be watching sales tax collections carefully as they are closely tied to the energy sector.
  • Thirty-four states and the District of Columbia expect sales tax collections to rise between 1.9 percent (District of Columbia) and 4.9 percent (Louisiana).
  • Sales tax collections are projected to basically remain flat in Colorado (0.5 percent) Texas (0.4 percent) and Wyoming (-0.2 percent).
  • Only West Virginia (-2 percent) anticipates a decline in sales tax collections by more than 1 percent.





Corporate Income Tax Forecasts for FY 2013

For most states, corporate income tax collections represent a much smaller share of tax revenues than other sources, on average representing less than 6 percent of the total. Forty-two states provided a corporate income tax forecast.

  • Nineteen states project increases of at least 5 percent, with eight projecting double-digit growth.
  • Fourteen states and the District of Columbia expect corporate income tax collections to rise between 1.3 percent (Rhode Island) and 4.5 percent (New York).
  • Officials in Mississippi (0 percent) project flat corporate tax growth.
  • Seven states anticipate corporate income tax collections falling in FY 2013, with Minnesota (-10 percent) reporting the only double-digit decline. The decline is due primarily to a projected decline in corporate profits, which lowers projected corporate payments for FY 2013 and results in a higher projected level of refunds in 2013.


Other Tax Forecasts for FY 2013

States also rely on a variety of miscellaneous taxes for revenue. These include taxes on oil and gas production, real estate transfers, tobacco, meals and rooms, insurance premiums, gambling, estates and others.

  • Nine states project severance taxes performing above FY 2012 levels. Three states anticipate essentially flat collections, and six states expect severance tax collections below prior year. Several officials commented that recent tax changes are the reason for the projected decline in severance tax collections.
  • In fifteen states and the District of Columbia officials project that FY 2013 real estate transfer taxes will exceed FY 2012 collections. Essentially flat growth is expected in five states, and only Minnesota forecast that real estate transfer tax collections will decline in FY 2013.
  • Miscellaneous taxes such as cigarette (Connecticut, 4.1 percent), insurance (Missouri, 9.7 percent) and inheritance (4.1 percent, Pennsylvania) are projected to increase in FY 2013; while motor vehicle (Texas, -3.4 percent), riverboat wagering (Indiana, -7.3 percent) and tobacco (Arkansas, -4.1 percent) are anticipated to decline.


Notes

[1] Dayadan, Lucy. Nelson A. Rockefeller Institute of Government Data Alert. Sept. 19, 2012. http://www.rockinst.org/pdf/government_finance/state_revenue_report/Data%20Alert%209.19.12.pdf.

[2] For more information on 2012 tax changes please see State Tax Update: August 2012. http://www.ncsl.org/issues-research/budget/state-tax-update-august-2012.aspx.

[3] Due to the biennial budgeting process in Montana no projection for FY 2013 is available. The FY 2013 tax forecast occurred in the 2011 legislative session. Collections for FY 2011 and FY 2012 are significantly higher than the 2011 forecast. However, no official change has occurred to the FY 2013 estimates, though actual revenues are anticipated to increase from FY 2012. The forecast will be revised in November 2012.

[4] NCSL calculations based on data from the Bureau of the Census, 2012. http://www.ncsl.org/issues-research/budget/state-reliance-on-major-taxes-2010.aspx

[5] Hawaii projects only an aggregate forecast, so separate information is not available for personal income, sales, and corporate income taxes. New Hampshire, which derives less than 5 percent of total tax revenue from the personal income tax, did not provide an estimate.

Share this: 
NCSL Summit 2014
We are the nation's most respected bipartisan organization providing states support, ideas, connections and a strong voice on Capitol Hill.

NCSL Member Toolbox

Denver

7700 East First Place
Denver, CO 80230
Tel: 303-364-7700 | Fax: 303-364-7800

Washington

444 North Capitol Street, N.W., Suite 515
Washington, D.C. 20001
Tel: 202-624-5400 | Fax: 202-737-1069

Copyright 2014 by National Conference of State Legislatures