Washington’s state tax revenues have held up well this year compared to other states

By: Emily Makings
2:44 pm
December 11, 2020

Lucy Dadayan and Kim Rueben of the Tax Policy Center consider whether state and local governments need additional funding from the federal government: “Some argue that states do not need assistance because of better than expected tax collections. But the State and Local Finance Initiative’s data show the actual revenue losses experienced by the states are deep and widespread, if not universal.” (Emphasis in original.)

The Tax Policy Center’s preliminary state tax data shows that, nationally, state tax revenues for the April through September period in 2020 were 5.3% below the same period in 2019.

According to their data, ten states’ tax revenue increased. Washington’s state tax revenues decreased by just 0.3% ($35 million). That’s the second lowest revenue decline; including the states with revenue growth, it’s the 12th best change in revenues.

Dadayan and Rueben write,

The steepest revenue declines were in states with a relatively high reliance on tourism and hospitality activities (e.g., Hawaii, Florida, and Nevada). States that depend heavily on the oil industry (e.g., Alaska and Wyoming) also experienced deep reductions in tax collections.

At the other end of the spectrum, the states that have seen some growth (or a smaller rate of decline) included those that: levy sales taxes on grocery food purchases (e.g., Idaho, South Dakota, and Utah); did not experience as many COVID cases in the spring or summer or did not mandate statewide lockdowns (e.g., Idaho and South Dakota); or enacted tax rate increases for fiscal year 2020 (e.g., New Mexico).

Washington’s tax revenues had a smaller rate of decline even though we exempt groceries from the sales tax and we had statewide lockdowns. But this analysis doesn’t control for legislative changes like increases in tax rates. Washington did enact new taxes in 2019, some of which took effect in CY 2020. Other states have surely made tax changes as well, so it’s hard to say where Washington would rank if the effects of any tax changes were removed.

Still, the state of Washington does not have a shortfall in the current budget. The Tax Policy Center’s data shows that, at least so far, our tax revenues have held up well compared to other states.

Categories: Budget , Tax Policy.