COVID-19 And Government Actions Caused State Tax Revenues To Plunge In April

COVID-19 And Government Actions Caused State Tax Revenues To Plunge In April

States and localities across the country are facing an unprecedented fiscal situation from the economic shock of the COVID-19 pandemic. Governors ar

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States and localities across the country are facing an unprecedented fiscal situation from the economic shock of the COVID-19 pandemic. Governors are confronting drastically falling revenues and rising costs. Prior to the onset of the COVID-19 pandemic, most states were generating solid revenue growth. And many built up robust rainy day funds. But the pandemic has largely wiped out earlier revenue gains and most states now anticipate substantial revenue shortfalls for the current fiscal year and for fiscal year 2021.

Preliminary  April tax revenue data, now available for most states, shows the impact of the COVID-19 pandemic and government actions on state tax revenues. There is one bit of good news, but for the most part, the story ranges from bad to ugly.  

The Good: Withholding still holding steady, at least in some states

States receive income tax payments in three primary ways—through taxes withheld from paychecks, from estimated payments (usually from the self-employed or investors or higher-income taxpayers), and from final payments made when taxpayers file their returns.

This year, the federal government and most states delayed their income tax filing deadlines from April 15 to July 15. Normally, estimated and final payments made at that April 15 deadline represent about 30 percent of annual total personal income taxes. In a typical year, states collect about 40 percent…



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