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

Jeffrey Clemens and Stan Veuger

No 27426, NBER Working Papers from National Bureau of Economic Research, Inc

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 2021 fiscal year. This is equivalent to 0.5 percent of GDP and 11.5 percent of our pre-Covid sales and income tax projection. Additional tax shortfalls from the second quarter of 2020 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 assets (e.g., pension plan holdings) that are at risk. Further dimensions of context include support enacted through several pieces of federal legislation, as well as spending needs necessitated by the public health crisis itself.

JEL-codes: H10 H12 H71 H79 (search for similar items in EconPapers)
Date: 2020-06
New Economics Papers: this item is included in nep-hea, nep-pbe and nep-pub
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Citations: View citations in EconPapers (43)

Published as Jeffrey Clemens & Stan Veuger, 2020. "Implications of the COVID-19 Pandemic for State Government Tax Revenues," National Tax Journal, vol 73(3), pages 619-644.

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Journal Article: Implications of the COVID-19 Pandemic for State Government Tax Revenues (2020)
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