After reaching a peak in mid-2022, inflation-adjusted tax revenue collections across the United States have been on a decline. This trend is attributed to the conclusion of the pandemic-era revenue surge and widespread implementation of tax cuts, as reported by Pew Charitable Trusts.
In fiscal year 2024, 40 states experienced a drop in inflation-adjusted tax revenue compared to the previous year. As a result, tax revenues now fall short of their 15-year growth trends in 38 states, including New Jersey.
Nationally, state tax collections were down by 2.8%, or $10.4 billion, from the 15-year trend at the end of Q2 2024 after adjusting for inflation. In New Jersey specifically, state tax receipts were 3.3% below its long-term trend when adjusted for inflation.
Oregon recorded the weakest performance with revenues falling 20.1% below its long-term trend due partly to its kicker rebate that returned $5 billion in surplus funds to taxpayers in fiscal year 2023. Minnesota and Iowa also saw significant declines due to substantial tax cuts that reduced collections.
Conversely, twelve states managed to stay above their 15-year trajectories: Alaska (118.5% above), New Mexico (16.5%), Wyoming (10.9%), Nevada (4%), Rhode Island (3.7%), South Carolina (3%), Montana (2.7%), North Dakota (2%), Texas (1.7%), Alabama (0.6%), Florida (0.5%), and Nebraska (0.2%).
Alaska, New Mexico, and Wyoming benefited from increased severance tax revenue linked to historically high energy prices during 2022 and 2023.
Justin Theal from Pew’s Fiscal 50 project noted that approximately three-quarters of total state tax revenue comes from levies on personal income, general sales of goods and services, and corporate income taxes—with corporate taxes being notably volatile.
During Q2 of 2024, corporate income taxes exceeded their long-term growth trends in 34 states; however, New Jersey was among the twelve states where corporate tax revenues fell short.
Corporate tax receipts underperformed in Indiana (-24.7% below trend), Oklahoma (-23.4% below), New Jersey (-11.8% below), Connecticut (-8.2% below), Mississippi (-5.6% below), Minnesota (-3.8% below), Massachusetts (-3.2% below), Tennessee (-1.2% below), Pennsylvania (-1.2% below), Illinois (-0.9% below), Wisconsin (-0.2% below), and New Hampshire (-0.2%).
Among those with better-than-trend performance were Alaska (+218.3%), New Mexico (+124.9%), Nebraska (+100 .6 % ), and Ohio (+100 .2 % ).
Personal income taxes fell short of their long-term trends everywhere except four states; in New Jersey they were down by -9 .5 %, slightly better than the national average decline of -11 .9 %. Washington saw personal income taxes farthest above its trend at +238 .4 %, while Tennessee was furthest behind at -97 .8 % .
General sales taxes stood just slightly over their historical trends by +0 .04 % as per Q22024 data; outperformance ranged between +13 .3 % seen within Wyoming versus less than half-a-percent increment observed inside NJ(only+002%).
Underperformances happened within nineteen other regions like Virginia(-67%)&South Dakota/Oklahoma(both@-09%).
