State tax collections continued to fall in the first quarter as muted consumption, falling incomes and weak profits plunged states into a deeper financial hole, the Nelson A. Rockefeller Institute of Government at the State University of New York said in a report to be released Wednesday.
The 47 states that have reported first-quarter revenues saw total tax collections fall 12.6% -- about $20 billion -- compared with the first three months of 2008, the institute said.
The steepest drops were in income taxes: Corporate income taxes declined 16.2% in the latest quarter, reflecting weaker profits. Personal income taxes fell 15.8%. Sales taxes were down 7.6%. Forty-five of the 47 states saw revenues decline.
Robert Ward, deputy director of the institute, said he expects tax collections to fall further in the second quarter, with weak consumer spending, rising unemployment and stock-market turmoil almost certain to reduce income taxes from earners large and small. "We don't normally use the word plummet but that is the operative word right now," said Mr. Ward.
Tax returns filed in April likely contain unwelcome news from high-income earners. "The expectation is that April income tax collections will be very weak," he said.
The worst recession in a generation is forcing municipalities of all sizes to furlough employees and cut programs in areas such as public safety and education. To cope, state and municipalities are scrambling for federal stimulus money, and some are raising tax rates.
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