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Implications of the COVID-19 Pandemic for State Government Tax Revenues

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  • Jeffrey Clemens
  • Stan Veuger

Abstract

We assess the COVID-19 pandemic’s implications for state government sales and income tax revenues. We estimate that the economic declines implied by recent forecasts from the Congressional Budget Office will lead to a shortfall of roughly $106 billion in states’ sales and income tax revenues for the third quarter of 2020 through the second quarter of 2021 (the 2021 fiscal year for most states). This is equivalent to 0.5 percent of gross domestic product and 11.5 percent of our pre-COVID sales and income tax projection. Additional tax shortfalls from the second quarter of 2020 (the final quarter of most states’ 2020 fiscal years) may amount to roughly $42 billion. We discuss how these revenue declines fit into several pieces of the broader economic context. These include other revenues (e.g., university tuition and fees) that are also at risk, as well as spending needs necessitated by the public health crisis itself. Further dimensions of context involve fiscal support enacted through several pieces of federal legislation.

Suggested Citation

  • Jeffrey Clemens & Stan Veuger, 2020. "Implications of the COVID-19 Pandemic for State Government Tax Revenues," National Tax Journal, National Tax Association;National Tax Journal, vol. 73(3), pages 619-644, September.
    • Handle: RePEc:ntj:journl:v:73:y:2020:i:3:p:619-644
    DOI: 10.17310/ntj.2020.3.01
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • H10 - Public Economics - - Structure and Scope of Government - - - General
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H79 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Other

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