WASHINGTON — State tax revenues at the end of last year rose for the first time above the peak levels at the beginning of the Great Recession after two straight years of growth, the Rockefeller Institute said in a report issued Thursday.
But local governments are not faring as well, said the report, which was based on Census Bureau data.
The 19-page report, which was authored by Lucy Dadayan, said states’ tax revenues grew by 3.6% during the fourth quarter of 2011, compared to the same period a year ago.
That is higher than the 3.5% gain the Rockefeller Institute reported in March based on preliminary Census Bureau data.
The 3.6% increase in the fourth quarter is 3.0% higher than the same quarter of 2007 and 7.4% higher than the fourth quarter of 2008, the report said.
Tax collections in most states are now above peak levels, but in 17 states, fourth-quarter tax revenues were still lower than four years earlier.
Twelve states reported double-digit increases of tax revenue in the fourth quarter, while seven states reported declines.
Revenue gains were particularly strong in North Dakota, at 49.2%, and Alaska, at 36.8%, the report said. The tax revenue growth in these two states is due to the booming oil and natural gas industries, it said.
All regions but the Far West reported growth in total tax collections. The Plains states showed the largest gain at 12.5%, followed by the Great Lakes states at 8.9%, the report said.
The Far West showed a decline of 3.9%, which the report attributed mostly to California, where tax collections fell by 8.3%.
Preliminary figures for the first two months of 2012 suggest tax revenues will continue to rise, with 45 states reporting early showing a 4.0% gain over the same two months in 2011, Dadayan wrote.
“While state tax collections have been rising steadily, the picture for local governments is quite different,” she wrote. “For most of the period during and after the last recession, local tax collections remained relatively strong. However, the trends are now shifting, due in part to the lagged impact of falling housing prices on property tax collections.”
“Most local governments rely heavily on property taxes, which are relatively stable and respond to property value declines more slowly than income, sales and corporate taxes respond to declines in the overall economy,” she wrote, adding that over the past two decades property taxes have consistently made up two-thirds of total local tax collections.
Collections of local property taxes made up 85.1% of tax receipts during the fourth quarter of 2011, according to the report.
Local property tax revenues showed a modest growth of 0.6% in nominal terms during the fourth quarter of last year, compared to the same period in 2010, but declined when adjusted for inflation.
“Services and functions that are largely funded by local governments, such as education and public safety, are likely to be under severe fiscal pressures for some time if current trends continue,” Dadayan wrote.
