WASHINGTON (Reuters) - Only half of U.S. states met their forecasts for withheld taxes last month after taxpayers made last-minute financial moves in 2012 for fear of having to pay higher federal tax rates in 2013.
Economic newsletter The Liscio Report published on Friday, said that compared with 77 percent that met or exceeded expectations in January.
At the same time, collections shrank from last February by 1 percent, on average. In January, they grew 6.7 percent.
Withheld taxes, which an employer takes from an employee’s paycheck and pays directly to the government, are a good barometer of revenue levels. States in the thick of crafting budgets for fiscal years beginning in July are eager for stronger revenue.
“This sharp decline pretty much confirms the shoving of bonuses and certain stock options into 2012 to escape higher taxes,” the newsletter reported. “Although most of our tax contacts knew they would not make their previously forecasted February collections, they did not revise those estimates ...”
Tax cuts passed under former President George W. Bush were set to expire at the end of 2012, and economists and political leaders warned that without a compromise, the country would fall off a so-called “fiscal cliff.”
Many U.S. taxpayers sold off investments or made other financial moves they had planned for the future during the waning days of 2012 in order to avoid potentially steep tax bills in the new year. This burst of taxable income affected states.
In the final quarter of 2012, states’ tax revenues likely grew 5.7 percent from the last quarter of 2011, Rockefeller Institute of Government reported on Wednesday.
Reporting by Lisa Lambert; Editing by Jeffrey Benkoe