Yesterday, we showed the chart of how ugly things had become for Federal Withholding Tax reciepts.

Today, we bring a similar chasrt, only this time, of the States Tax Revenue — which is similarly ugly:

>

0718-nat-states

chart courtesy of NYT

>

As you can see, we are much deeper than the 2001 recession.

Excerpt:

“The anemic economy decimated state tax collections during the first three months of the year, according to a report released Friday by the Rockefeller Institute of Government. The drop in revenues was the steepest in the 46 years that quarterly data has been available.

The blow to state coffers, which the report said appeared to worsen in the second quarter of the year, reflects the gravity of the recession and suggests the extent to which many states will probably have to resort to more spending cuts or tax increases to balance their budgets.

Over all, the report found that state tax collections dropped 11.7 percent in the first three months of 2009, compared with the same period last year. After adjusting for inflation, new changes in tax rates and other anomalies, the report found that tax revenues had declined in 47 of the 50 states in the quarter.

All the major sources of state tax revenue — sales taxes, personal income taxes and corporate income taxes — took serious blows, the report found.”

And what is amazing, as bad as Q1 turned out, the quarter that just finished (Q2) looks to be even worse.

>

Source:
State Tax Revenues at Record Low, Rockefeller Institute Finds
MICHAEL COOPER
NYT, July 17, 2009

http://www.nytimes.com/2009/07/18/us/18states.html

Category: Economy, Taxes and Policy

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

50 Responses to “State Tax Revenues Chart”

  1. ella says:

    As I look for “Green Shoots” in the economy, I do not simply take the word of CNBC. I look instead at national, state and local tax revenues, freight shipments, imports, un and underemployment, credit receipts, credit delinquencies and foreclosures, auto sales, and bona fide closed real estate sales. In the current environment, I think that these are leading indicators, since they track earnings, transactions and defaults.

    In a consumption based economy if there is no credit or money – there is little economic activity. Little economic activity means more and more are un-underemployed. What a cycle.

    Me, I am saving for the future.

  2. for further: http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=Rockefeller+Institute+of+Government

    y mas: http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=Rockefeller+University
    ~~

    past that, ella, you go w/: “Me, I am saving for the future.”. Just out of curiosity, which Medium are you employing? or, differently, what are you Saving?

  3. danm says:

    Me, I am saving for the future.
    ————
    I think we are still at the tipping point. With Fed funds at close to 0%, the interest rate play is finished. It’s this 0% that gave us the calm after the storm. It might stay flat for a while but when it goes up again, it’s going to get ugly out there.

    The moral hazard out there is growing exponentially. You can stretch the elastic until you can’t anymore. Entropy will have the last word.

    I look at corporate profits after tax. At more than 7% of GDP, they are still at historical high levels. IMO, they are going to 4%.

    As more and more households are forced to deleverage, assets will become increasingly attractive.

    http://research.stlouisfed.org/publications/net/20090701/netpub.pdf

  4. Mike in Nola says:

    Texas is finally starting to feel the heat in unemployment. Houston lost more jobs during the past 12 months than in any 12 month period since 1987.

    http://www.chron.com/disp/story.mpl/business/6534055.html

    Yesterday, there was an article about 15,000 people about to drop off the unemployment rolls because they had run out of benefts and no provisions had been made because “Texas is different.” (my quote)

    http://www.chron.com/disp/story.mpl/headline/metro/6529471.html

    Of course, the wingnut governor courting the crazies refused stimulus money for unemployment because it would expand eligibility and encourage laziness. Now the state is having to borrow to get money for extensions of benefits.

    Texas doesn’t collect income or inheritance tax. Cities rely mostly on sales and property taxes. No sales tax on food, so those who aren’t buying more than necessities aren’t contibuting much revenue. Assessments are down and some of the school districts are having problems.

    Nevertheless, still lots of cheerleading here. People here don’t realise they were insulated as much as they were only because of the oil bubble last year and the minibubble this spring. I was berated for suggesting that a developer might have trouble selling condos in a luxury building nearing completion where the prices start at over $500k and the developer said that “a few” of the units that had been under contract hadn’t closed.

  5. Marcus Aurelius says:

    As much as we kvetch and kvell about the Federal government, and as much as there is a call for “States rights,” State governments are equally incompetent (and arguably even worse) in their ability to provide economically efficient and/or rationally-conceived and managed programs, products and services to their citizens. I also think there’s more corruption on the state level (in fact, my experience has been that the more local the government entity, the more corrupt it is).

    If I’m not mistaken, as a result of Federal taxes and related services being cut over the years, state and local taxes have increased to make up for the shortfall. In aggregate, do we pay fewer taxes (as a percentage of income) now than we did when Federal money was involved? Has there been any improvement in local government(s) as their tax receipts have gone up? I don’t see any benefit, personally. I can’t name a state or local tax that provides me with a good ROI.

    So now the obese State beast will be starved too?

    Good.

    — Grover Norquist, Jr.

  6. danm says:

    Has there been any improvement in local government(s) as their tax receipts have gone up? I don’t see any benefit, personally. I can’t name a state or local tax that provides me with a good ROI.
    ———–
    No because you’re probably still paying off stuff that was built in the 80s.

    The reality is that governments have been spending and promising more they have been collecting for a few decades now.

  7. danm says:

    I can’t name a state or local tax that provides me with a good ROI.
    ——————–
    I look for ROIs on the private side. Government IMO should be there to protect my rights and quality of life, period. In my mind, government should be more like a referee.

  8. OkieLawyer says:

    OT:

    An article was e-mailed to me this morning. I thought readers here would be interested.

    MAD world: China’s bind is ours, too

  9. Bruce in Tn says:

    Yes, Okie Lawyer, the article could have been written by one of us anytime in the last 24 months,

    Frankly, the Chinese are realizing that in the co-dependency that is the US-China trade policy for the last decade, that they are the ones who really look stupid. Had they all along been trading in those treasuries for something like gold mines, Rio Tinto, offshore oil leases…those sorts of things…they could much more aggressively move to a global currency the way the other players, Russia, Brazil, Saudi, France, etc. would like today.

    They co-signed, and we are the deadbeat who will beat them out of their money…

  10. OkieLawyer says:

    Bruce in Tn:

    I seem to remember years ago US representatives telling China to let their currency float freely. So, I don’t really see this as all our fault.

  11. wunsacon says:

    >> I look at corporate profits after tax. At more than 7% of GDP, they are still at historical high levels. IMO, they are going to 4%.

    Possibility: If we keep bailing them out, the %-of-GDP will *rise*. (Ugh.)

  12. danm says:

    Possibility: If we keep bailing them out, the %-of-GDP will *rise*. (Ugh.)

    ————-
    Increasing bailouts will only squeeze out the private side.

  13. Bruce in Tn says:

    Okie:

    I wasn’t saying it was our fault…I am saying they were foolish, and will pay more for backstopping us than we will. They were working for the rest of us to do well, and now the fruits of their labor are being depreciated, because they made a bad choice. Fault is a legal term….to complex for me. On the stupid scale, they beat us handily, for theirs was the more stable economic plan…

    http://www.usatoday.com/money/perfi/taxes/2009-07-16-rich-tax_N.htm

    Just raise rates…that will bring in more money..

  14. China MFN + Wal*Mart, your Supermarket to Slavery was designed to re-Order the U.S. Retail landscape, and eviscerate its Manufacturing Base–while providing the Smokescreen of ‘Everyday Low Prices’ to Mask the, concomitant, decline of living standards/growth of Gov’t’s Tax Bite..

    you know, LSS..

    http://www.thefreedictionary.com/concomitant

  15. wunsacon says:

    I don’t understand. What’s being squeezed out? Bailout money goes to corporations and ends up juicing their bottom lines even as they lay off employees. Isn’t it possible that corporate profits might rise?

    Oh, well…the S&P earnings have plummeted. So, you’re already correct. (Do you know what that means though, right? We need more bailouts!)

  16. danm says:

    I seem to remember years ago US representatives telling China to let their currency float freely. So, I don’t really see this as all our fault.
    ——–
    It takes 2 to tango.

    It think it’s important to note that most of their reserves have accumulated of the last few years. And they have been kicking tires and trying to buy asset, the problem is that more and more countries are nationalizing these or declaring them a national “treasure” so it’s not as if there was a lack of will on their part. Why do you think they’ve been signing deals in South America and Africa? I think they’ve been witnessing a huge lack of goodwill on our side.

    When they figure they can’t buy anything with their paper they’ll decide to jerk the US around by selling huge chunks here and there at THEIR convenience.

  17. matt says:

    @Marcus A: “As much as we kvetch and kvell about the Federal government, and as much as there is a call for “States rights,” State governments are equally incompetent (and arguably even worse) in their ability to provide economically efficient and/or rationally-conceived and managed programs”

    Right now, I pay something like 30 percent to the Federal Government, 7 or 8 percent to the state (and maybe 2 percent city). Now, suppose that is flipped and I pay 7 percent to the Federal government (which covers defense and a few other Contstitutionally provisioned functions). I pay 30 percent to the State.

    In this scenario, the State government is much bigger and the Federal Government is much smaller. Now you’re right, it’s very likely that the big state government could be just as lousy as a big Federal Government.

    Here’s the catch though – if my State government makes really stupid decisions, the scope of the direct fallout is limited to my State. Compare this to a gigantic Federal Government, whose idiocy directly affects all 50 States.

    A good example of this is the insurance industry, which is in much better condition than the banking industry (sans the elite four). Most States did a much better job at regulating the insurance industry than the Federal Government did regulating the banking industry.

    It is also easier for an industry to capture one Federal regulator/legislature/etc. than it is for an industry to capture 50 separate State entities that perform similar functions. In that case, I predict that regulatory capture would be less of an issue.

    I’ve mentioned all of this before, but it’s worth repeating.

  18. danm says:

    Bailout money goes to corporations and ends up juicing their bottom lines even as they lay off employees. Isn’t it possible that corporate profits might rise?
    ————
    Bailout money has been going to which corporations? If I recall correctly, credit spreads went up drastically.

    Companies had good earnings and probably had credit facilities. So in the the last year they’ve probably been cutting costs and using credit facilites to survive the first crisis.

    Many are probably cash flow break even. In a few months they’re going to have to accept the fact that their business plan makes no sense. For many it was based on a fictitious revenue level which is getting rebased. Many were probably created on a bad business plan and they will fail.

    We’ve seen nothing.

  19. danm says:

    We’ve seen nothing
    ——–
    Just think of all those little firms/consultants/contractors that will be soon cut off from government at the state of muni level.

  20. danm says:

    at the state of muni level

    at the state and muni level.

  21. OkieLawyer says:

    Bruce in Tn:

    I know that you have Libertarian beliefs (generally) and I think you were trying to be sarcastic with your remark about raising rates, but under the Pareto Principle, raising rates on the wealthy first makes perfect sense. (The top 20% own 87% of the wealth in the US right now and in order to get that much, they had to make an even larger percentage than 87%.) Another reason it makes sense is that after you pay for basic living expenses (food, shelter, transportation, savings for retirement, etc.) you start getting into investments and especially luxury. It is much easier to tax those whose basic living expenses are all paid for and are living in luxury (and yes, $1 million per year is definitely luxury territory — even in New York City or San Francisco).

    On the link you provided, the chart on the left of the page indicates that the top tax rate would be 35% once someone hit $372,950 per year (as in, every dollar someone makes above $372,950 per year will be taxed at 35%). That’s a lot of income and 35% is not that high of a rate compared to other countries and what programs (health care for all citizens) that he is trying to accomplish.

  22. km4 says:

    The Swan is still Black, and We’re Still Screwed
    by ManfromMiddletown
    Sat Jul 18, 2009 at 06:39:39 AM PDT
    http://www.dailykos.com/story/2009/7/18/754862/–The-Swan-is-still-Black,-and-Were-StillScrewed

    Excellent diary!

  23. panhandle says:

    Mike in NOLA:

    A couple of points:

    1. Last time I checked, NOLA wasn’t in Texas. Which is it, Chief? The great state of Texas or Louisiana?
    2. Our “wingnut” governor, among others, saved the incompetent leaders of NOLA and the state of Louisiana after that Cat 4 storm came ashore in Mississippi 5 years ago. That’s the funny thing. It didn’t even hit your state, yet your state was the only one that couldn’t bootstrap, couldn’t cope and came running to momma. Shit, your mayor got on the first flight to Dallas. What a pussy. A simple thank you would do.
    3. You don’t really have a handle on the Texas system of taxation, Chief., Yes, sales tax is down, but property tax is up. Because property taxes bear a disproportionate burden, we’re in far better shape than most places.

    Finally, Chief, if you want a liberal haven, skeedaddle on back to Louisiana. We’ve got plenty of your former neighbors here and they aren’t exactly making Texas a better place. So giddayup!

  24. danm says:

    A good example of this is the insurance industry, which is in much better condition than the banking industry (sans the elite four).
    —-
    It’s not over till the fat lady sings.

  25. Mike in Nola says:

    Interesting article on Chinese manufacturing:
    http://www.atimes.com/atimes/China/KG18Ad02.html

    As to the Ponzi scheme comparison, Hugh Hendry made the analogy last week in one of those FT videos I linked.

    If China hadn’t just kept sitting on those reserves, but had stopped buying the Treasuries or pushed them out into the market, our rates would have shot up and the US economy would have slowed dramatically, stopping China from exporting and expanding its economy through exports.

    The other option would have been for China to allow its currency to float. As it collected US reserves, the Chinese currency would have risen, making it impossible for the Chinese to continue the cheap export game.

    Either would have provided a self-correcting mechanism. But, that would have required true free trade. Instead, the US tolerated Chinese protectionism, the Chinese took advantage of this toleation, and both are screwed.

    The Chinese have huge amounts of surplus capacity with no place to send their goods. They are subsidizing exports, but this just brings in more trade surplus. They could abandon the export-driven model by creating social safety nets and distributing payments to those who aren’t wealthy. This would increase demand, for goods from the factories and employ more people, with some chance of producing a sustainable recovery. Instead, they are using the Easy Al and Helicopter Ben model and easing credit to create a bubble which can’t last.

  26. sailorman says:

    Has anyone seen the data for the US income tax revenue for 2009 (collected in April)? I think there must be a massive drop in US revenue with all the deductions from the losses.

  27. Onlooker from Troy says:

    Marcus
    http://www.ritholtz.com/blog/2009/07/state-tax-revenues-chart/comment-page-1/#comment-195064

    Is any of that yours or is it all Grover Norquist? It’s not clear at all, but I suspect it’s all Norquist, not your words.

    Just to clarify.

  28. BG says:

    I guess one of the things that has amazed me the most recently is the resilience of the State and local government coffers. How are they holding up? They must be getting tons of money from the Feds. California is the only one you really ever hear anything about;but, I have been waiting for the City of Birmingham to declare bankruptcy after their unfortunate decision to listen to GS a few years back. Plus here in NC, state money is very tight. I received my tax refund months later than usual and I also heard the Unemployment fund was totally depleted around the end of ’08; yet things go on. We’re still here.

    I just feel the whole system is teetering on the brink of something massively worse; but, again I am surprised we have not heard more from the state and local municipalities.

    Lastly, we can not be very far from a completely new way of collecting taxes; because our federal system is supposed to be based on taxing payroll and capital gains. With no jobs and no profits, this model no longer works. IMO, the Feds will quickly over the next few years move us to a consumption model.

    My two cents worth.

  29. BG says:

    …plus Property Tax. That no longer works either.

  30. Winston Munn says:

    Wow! You can see Russia from the front porch of the 2005 peak!

  31. thetanman says:

    Research on indicators and bromides like sell in May and go away ect. Most of indicators and blogging gurus are no better than coin flips. One thing that does work: stocks fall when deficits and inflation are rising. Otherwise deficits don’t seem to matter much. Also there are long periods of time, when despite bad economic news, stocks rise.

    http://www.cxoadvisory.com/blog/internal/default.asp

    Several lenders have called my sister and tried to loan her $200,000 at 4%. I have to admit the deflation scenario deflates more each day. Check out Doug Noland and the figures from the JPM ect earnings reports. Go down to the bottom of the page for his numbers. Banks are lending a ton for mortgages. BAC funded $110 billion in first mortgages. No wonder the market ramped despite cheesy bank earnings. These guys are pros at blowing bubbles and when they get some traction….

  32. thetanman says:

    oops not that you want it here’s the Noland link.

    http://www.prudentbear.com/index.php/creditbubblebulletinview?art_id=10250

  33. Matt:
    Except that the Insurance industry wants one regulator. Not 50. They’ve been pissed about that for years. The professor in my RMI(Risk Management and Insurance) classes even talks about it.

  34. matt says:

    I got a letter from the social security administration informing me about my “benefits.” They were kind enough to send a newsletter. In bold letters, it said, “Will social security still be around when I retire? Yes.” :D They’ll have to keep clicking their heels together for that one to come true.

  35. thetanman says:

    BG,

    I received a tax refund and didn’t even file. They’ll probably penalize me for late taxes as its the exact amount I sent in with my extension. My state is screwed up.

  36. James says:

    Here’s another view:

    http://manyeyes.alphaworks.ibm.com/manyeyes/visualizations/change-in-quarterly-tax-revenue-janu

    comparing January – March, 2008 with the same period in 2009. Revenue is from personal income, corporate and sales streams. See:

    http://www.rockinst.org/pdf/government_finance/state_revenue_report/2009-07-17-SRR_76.pdf

  37. constantnormal says:

    nice piece over at Calculated Risk showing a chart of how sales in a lot of areas have apparently bottomed …

    http://www.calculatedriskblog.com/2009/07/slip-sliding-sideways.html

    … but as for any recovery, not so much. And while they make the point (or rather quote Janet Yellen pumping the green shoots thing) that for GDP to rise a little bit does not take very much, I wonder if the secondary declines in institutional spending (i.e., state and local government spending, corporate investment, etc) that we are starting to see larger reductions in will either overwhelm the leveling off of purchases, or will result in the once-speculated W-shaped recession — or maybe Soros’ square-root-symbol shaped recovery, if one wants to look on the bullish side.

    There is another shape, which is a brief and short step up in the GDP, only to be followed by another steep decline, taking us to things like 300-400 on the S&P 500 — this would presumably be coincident with stuff like the US Treasury losing its AAA rating, or even worser thoughts like an American default tsunami. Then we would presumably see deflation dealt a serious blow, as hyperinflation blossoms like flowers in the spring.

    Or maybe not.

  38. Marcus Aurelius says:

    Onlooker from Troy

    All me.

  39. Onlooker from Troy says:

    MA

    Ah, OK. I was confoosed. ;)

  40. Andy T says:

    Common sense ain’t so common. I wonder when our leaders in government and banking are going to realize that every aspect of boom and busts are pro-cyclical. In good times, government needs to save and constrain itself…build up surpluses. So that in bad times you can spend like crazy and turn those surpluses into deficits because when things go to shit, EVERYTHING goes to shit. All of your social programs get max’d out AND your revenues go down at the SAME time.

    These states with their balanced budget mandates is just about the most asinine economic policy one can imagine. There are all sorts of unintended consequences. In good times, there’s a tendency for the state to not save anything…there’s a tendency for state programs (i.e. education) to spend whatever they get. There’s a “use it or lose it” aspect to some of these budgets, so various departments just engage in wasteful spending because “they might as well.”

    Now, with the current depression, nothing can get funded, no matter how useful or good the idea may be.

  41. Pat G. says:

    States are replacing their tax shortfalls by using money that’s being given to them by the USG for other purposes. When that money stops trickling in, it’ll get real interesting.

  42. Mike in Nola says:

    Andy T:

    What you suggest goes against human nature. I know it goes against my nature.

  43. Onlooker from Troy says:

    I’d have to disagree Mike. I think that the fundamental true nature of humans actually leads them to save for a rainy day, store up for hard times, etc. We’ve managed to engineer that out of us by having govt backstop us and by creating this consumerism of the last few decades.

    Look at what the Chinese people do. They save like crazy because they know that it’s up to them to provide for their future. They can’t just spend it all with the knowledge that govt will provide a backstop.

    But that is of course why we couldn’t keep our mitts off of any bit of saved money/capital in the country over the last couple of decades. There was always going to be more in the future. On every level we scraped everything bit of money from every corner and leveraged it up. Party on.

    Now that we’ve crashed the thing maybe we’ll actually be able to save again, delaying gratification and actually planning ahead. One can only hope that the lesson can stick. God knows we’re fighting it.

    Indeed we need to actually go back to some anti-cyclical thinking and economic planning. But you do have to guard against those who are eying the treasure that sits just begging to be pilfered and spent.

  44. [...] Barry Ritholtz takes a look at the rapidly collapsing income taxes being collected by state governments; muni bond investors take note.  (TBP) [...]

  45. jc says:

    CA has a moving target with their rev losses. Even if job losses peaked at 700K or whatever how many more jobs will be lost over how many months before the train reverses direction? Next year will be worse than this year. No way around it.

  46. matt says:

    @Onlooker from Troy:

    I agree. Humans are pack-rats (not just money). I have a lot of crap that I don’t need an won’t ever need, but I feel compelled to save it since I have room. Maybe it’s a spillover from the hunter-gatherer days, but it seems to be human nature to hoard things.

  47. [...] budget in surplus Most state budgets are in crisis. The Big Picture’s Barry Ritholtz notes that state tax revenue has fallen sharply the last two …. The left wing Center for Budget and Policy Priorities notes that “[a]t least 48 states [...]