Well, we can’t say we were surprised.
After growing an average 15.9 percent during the first three quarters of last year, state revenue growth from personal income taxes slowed to a 1 percent crawl, according to preliminary estimates from the State University of New York’s Nelson A. Rockefeller Institute. But don’t worry, at least we saw this coming.
Why? Because of that end-of-2012 showdown over a mix of spending cuts and tax hikes known as the “fiscal cliff.” Freaked by the prospect of higher taxes in 2013, many rich taxpayers sold stocks and collected income on bonuses in 2012 rather than the next year in order to benefit from lower rates.
“The state personal income tax revenue picture in the first two quarters of calendar year 2013 represented the strongest growth since the start of the Great Recession. However, the growth in personal income tax collections softened in the third quarter of 2013 and was a mere 1.0 percent in the fourth quarter of 2013,” the authors wrote. Personal income taxes accounted for about two fifths of overall revenue.
In terms of total revenues, 38 states saw increases from the fourth quarter of 2012 to the fourth quarter of 2013. Alaska posted the biggest decline — a 45.7 percent drop, in large part due to a drop in oil and gas production and therefore taxes. Kansas was next with a 9.2 percent decline, thanks to tax cuts.