Update: An earlier version of this post omitted Delaware, which also does not have a sales tax.
State governments collected more than $846 billion in tax revenue in the last fiscal year, the highest amount ever reported, as a rebounding economy boosted coffers hit hard by the recession.
The Census Bureau reported Tuesday that states collected $309 billion in individual income taxes last year, a 10 percent increase over the previous fiscal year. Income taxes make up more than a third of total state tax revenues. Corporate income tax collections rose to $45 billion, up almost 8 percent from the year before.
General sales taxes, which make up 30 percent of the revenue states collect, accounted for $254 billion in state tax revenue. That number was up almost 4 percent over the 2012 fiscal year.
Forty-eight states reported growth in tax revenue in the last year. North Dakota, where a booming energy sector is generating huge amounts of income and extraction taxes, saw its tax collections rise from $4.1 billion in Fiscal Year 2012 to almost $5.3 billion, a 27.8 percent increase. North Dakota’s income tax revenue grew by 48 percent, while state sales tax revenue increased by 13 percent.
California, which had to cut more than $20 billion from social programs at the depths of the recession, took in $133 billion over the fiscal year, a 15.6 percent increase. Much of that money came from individual income taxes, especially from capital gains generated by initial public offerings of tech giants like Facebook.
The data show how policy decisions made by lawmakers in state capitals, and by voters asked to weigh in on tax policy, can have long-term impacts on state revenues. California’s revenue spiked after voters approved a 2012 ballot measure that raised personal income taxes on residents who make more than $250,000 a year and raised the state sales tax by a quarter of a percent. Almost two thirds of the $18 billion increase in California’s total revenue collections between 2012 and 2013, $11.8 billion, came from growth in personal income tax revenue.
In Alaska, on the other hand, one of two states that saw tax revenues drop, the state legislature passed a measure last year that cut taxes on some oil production and offered oil companies a tax credit for each barrel of oil produced, a step intended to reverse the state’s downward production trend.
Those cuts meant Alaska would forgo billions in severance tax revenue, which states collect from industries that harvest natural resources like oil, minerals or lumber. The state Department of Revenue estimated in December that the amount of tax revenue generated by severance taxes would be cut in half between Fiscal Year 2013 and Fiscal Year 2014, and by a further $400 million in 2015. The Census data show that trend is already beginning: In Fiscal Year 2012, Alaska collected a record $5.78 billion in severance taxes. The following year, that number fell to just over $4 billion.
Wyoming, the only other state to see its tax collections dip last year, took in $100 million less in severance taxes than the previous year, accounting for the vast majority of the $118 million dip in overall revenue.
Washington State budget writers received a huge influx of revenue in 2013 after voters passed a ballot initiative in 2012 that ended the state monopoly on liquor sales. Before the initiative passed, Washington received about $33 million in revenues from the sales of alcoholic beverage licenses. The year after the ballot measure passed, license fees shot up to $257 million, a 750 percent increase. That accounted for nearly all the growth in license revenue across the country, which jumped 50 percent in a single year.
Part of the growth in personal income taxes came from wealthy individuals racing to beat the looming fiscal cliff deadline, said Todd Haggerty, a budget analyst at the National Conference of State Legislatures. Many taxpayers sold stock or otherwise moved taxable income into tax year 2012, which meant states received that revenue in Fiscal Year 2013, in order to avoid higher taxes expected after the cliff.
State tax collections have rebounded after a recession that dried up individual and corporate income tax revenues. In Fiscal Year 2008, just as the recession began, states collected $779 billion in total tax revenue. That number fell off a cliff in the following two years, to $713 billion in Fiscal Year 2009 and $705 billion in Fiscal Year 2010.
Those shortfalls forced harsh cuts in state budgets. The Center for Budget and Policy Priorities reported in 2012 that states faced a collective $191 billion budget shortfall in Fiscal Year 2010, and a $130 billion shortfall the following year.
Some states found ways to raise revenue by hiking fees that didn’t always generate headlines. Tax revenue from hunting and fishing licenses has jumped by $100 million over the last five years, a nearly 10 percent increase. Other licensing fees rose by about the same amount, $94 million, between Fiscal Years 2012 and 2013.
“You see this increase in the less visible revenue-raisers, license fees, hunting fees, hospital fees, even,” said Elizabeth Malm, an economist at the Tax Foundation. Legislators take less political heat when they raise fees than when they raise taxes, though that sparks a different debate: “There’s always that line between the definition of taxes versus fees,” Malm said.
States that generally avoided the most severe budget situations were those that relied most heavily on severance taxes for their revenue. Throughout the recession, those states continued to boom; North Dakota never experienced a revenue decline, while Alaska had so much money coming in that it built up enough reserve funds to continue government operations for more than two years without interruption.
Severance taxes declined nationwide by 4.5 percent, about $800 million, between 2012 and 2013. Texas saw its severance tax revenue increase by $1 billion.
Five states — Alaska, Oregon, Montana, Delaware and New Hampshire — do not levy a sales tax, while eight states don’t levy an income tax. Most states that rely disproportionately on one source of tax revenue are more vulnerable to the effects of a recession if that revenue stream dries up.