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Wednesday, Jan. 20, 2021

Has the pandemic’s impact on state tax receipts been less severe than anticipated?

Lisa Freedland, Gigafact
yes

The pandemic‘s effect on state tax revenues has been less severe than first expected. In 2020’s second quarter, receipts dropped as states extended tax deadlines in line with the federal government. The Tax Foundation in September concluded the impact was “far lower” than first feared. Specific federal relief measures have helped offset gaps. An additional $100 billion enacted in December will extend support in 2021.

Brookings forecasts a total state and local decline of 5.7% in 2021, following a 5.5% fall in 2020.

In California, which imposes high income-tax rates, receipts between August and October were 22% higher than expected. The state foresees one-time “windfall” gains in its next fiscal year of up to $40 billion. Any effect from widely-reported relocations by certain companies and prominent residents to lower-tax states would not be felt immediately.

Sources

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