May 8 U.S. state income tax collections are
likely to have soared in April but that increase could be
short-lived, said a report on Wednesday.
Not all states have yet released their April revenue
figures, but some have and several are reporting big bumps in
personal income tax collections, a major source of revenue for
most states. California reported on Wednesday that it has
collected $4.6 billion more than expected so far this fiscal
year through April.
But the good news probably comes with a hitch: the surge
stems in part from taxpayers who pushed income ahead into 2012
to avoid federal tax hikes that took effect in January,
according to the report from the Rockefeller Institute of
Government, an independent research group in Albany, New York.
"The temptation will be (for states) to treat it as
recurring revenue available to support ongoing spending, or
available for tax cuts," wrote the report's authors, Don Boyd
and Lucy Dadayan.
"Caution is in order" as the temporary surge could mask
underlying economic weakness, they said.
"Over the longer term, this could be bad news - it could
mean that accelerated money received now, used to pay current
bills, will not be there to pay for services in the future,"
For states still struggling to lift revenues above
pre-recession levels, higher income tax collections could help
plug budget holes.
Rockefeller reported last month that the fourth and final
payment of estimated taxes to states rose by 25.2 percent.
That's up from the 6.7 percent median increase for the first
On April 30, Connecticut raised its revenue forecast for
2013 by $240.6 million, putting the state on track for a
surplus. At the same time, Connecticut revised downward its
revenue projections for fiscal years 2014 and 2015, in large
part because of one-time tax revenues in 2013 being brought
forward from next year.
An April tax revenue boom might not necessarily be hiding a
darker secret, however. It could also be due to an economy that
was stronger the previous year than believed, Rockefeller said.