Albany, N.Y.  ----  State tax revenues grew by 10.8 percent in the second quarter of 2011, and by 8.4 percent annually for the period that ended the fiscal year for 46 states ----  marking six straight quarters of growth and the strongest annual gains since 2005, according to the latest State Revenue Report from the Rockefeller Institute of Government.

For the second quarter, every state but one (New Hampshire) reported an increase in overall tax collections compared to the year-ago period, according to Institute research and U.S. Census Bureau data. Nineteen states reported double-digit percentage increases.

 

Preliminary figures for July and August 2011 suggest continued, though less robust, growth in revenues. Overall collections in 41 early-reporting states showed average gains of 6.8 percent compared to the same months of 2010.  

 

State collections from personal income taxes took a dramatic jump ----  rising more than 16 percent ----  in the April-June quarter, compared to the same period of 2010. That was the third straight quarter of double-digit growth in personal income tax revenues, but such strong growth is unlikely to continue given current economic trends, write the report's authors, Lucy Dadayan and Robert B. Ward.

 

Tax collections for local governments, meanwhile, have headed in the opposite direction. The second quarter of 2011 marked the third consecutive quarter of declines in local property tax revenues. In total, local property taxes declined by 1 percent in the second quarter of 2011 compared to the same quarter of 2010.  

 

Even for states, the longer term revenue picture remains mixed. Despite the recent gains, states' tax revenues remained lower in the second quarter than they were four years earlier.

 

The revenue forecast for states is further clouded by recent evidence of weakness in the national economy, Dadayan and Ward write. That evidence includes continued troubles in housing markets, weak consumer confidence, significant economic challenges in other countries and little chance of future economic stimulus from the federal government.

 

The authors suggest that a continuation of weaker growth through the coming fiscal year may be the most likely scenario.

 

"In recent months, growth in tax revenues has been significantly and unsustainably stronger than growth in the economy," Dadayan and Ward write. "If the economy continues to show weakness during the second half of 2011 and into early 2012, revenue growth will likely soften as well."

EXTck: States' Gambling Revenues Rose in 2010

For a full copy of the report, visit www.rockinst.org.

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