Research report
Are State Tax Revenues Back to Normal Growth or Showing Early Signs of Economic Slowdown?
February 24, 2020
Primary tasks
Abstract
State and local government tax revenues showed normal growth in the third quarter of 2019 after declines in the fourth quarter of 2018, much weaker growth in the first quarter of 2019, and robust growth in the second quarter of 2019. Most of the volatility in the prior quarters was attributable to the TCJA.
Preliminary data for the fourth quarter of 2019 indicate continued growth in overall state tax revenue collections. However, growth is more in line with historical averages, mostly because the TCJA’s impact has waned.
Economic factors driving revenue growth were all positive in the third quarter of 2019. However, our analysis of longer-term trends indicates that some economic factors, such as house prices or spending on durable and nondurable goods, seem to have weakened in recent months. But it is hard to say when the next recession may occur and how severe it might be.
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