State Tax Revenue Climbs

Posted by Kelley LearcloseAuthor: Kelley Lear Name: Kelley Lear
Email: kelley.lear@redmoonsolutions.com
Site: http://blog.redmoonsolutions.com
About: Kelley is a member of the executive leadership team and leads our sales and marketing efforts at Red Moon Solutions. Kelley’s extensive experience in project management, product management, and consulting with Fortune 500 and Global 1000 clients is extremely important in this role.See Authors Posts (127) on Mar 2, 2011 | 0 comments

Some would say that the February 1st, 2011 article in The Wall Street Journal entitled “State Tax Revenue Climbs” by Conor Dougherty is somewhat optimistic or at least a bit encouraging. I however, am choosing to add this topic to my “Red Whine Wednesday” posts.

The “good news” presented is that in the fourth quarter, state tax revenue grew at its fastest rate in nearly five years. The basis for this revenue growth is the “steadily improving economy and higher income and sales taxes in some states”. In fact, state tax collections increased 6.9% in the 41 states that have reported their revenue (report release Tuesday, by the Nelson A. Rockefeller Institute of Government at the State University of New York). And on the other side of the revenue coin, income-tax collections climbed 10.7% across 41 states. With states like California forging ahead on the rebound with a 32% increase in the last quarter. The growth in income taxes is said to reflect large growth in corporate profits and a rapidly recovering stock market. However, it is interesting that corporate income taxes, which are typically the most volatile and are only a small share of state tax collections, were actually the fastest growing category in the quarter at an increase of 14.8%.

The bad news is that even though state revenues are growing, they still have not rebounded enough to recover from the deep crevice they fell into during the recession. In addition, as the Wall Street Journal reports, the 2012 fiscal year which starts in June, will see states that will no longer have the roughly $150 billion that was estimated flowed to state budgets from the 2009 federal stimulus package. Even with the supposed tough state budgets cuts being lamented in local papers around the country, “stringent efficiencies” wrought by current administrations and across the board state workforce cuts, they will still probably miss their marks.
Politics as usual and fiscal irresponsibility can definitely take some of the blame. But, what does that mean to us the taxpayers? We can probably expect a multitude of other creative ways for states to raise revenues. They may even use ever more creative terms to institute new taxes, or to increase existing taxes; and they will probably be out in full force with state income and state sales and use tax audits, heavier than ever before.

Have you been audited lately? Was it painful? From everyone I have talked to out there, it most definitely was painful. An all consuming mission to look at every piece of data you own to try to figure out how they can squeeze some more revenue out of you. I hope to follow up with an eBook on audit and audit response with respect to data requests from revenue agents. Hope this will help.

Good luck my friends.