WASHINGTON — State tax revenues continued rebounding, rising 3.9% from July through September in the third straight quarter of growth, the Rockefeller Institute of Government reported Tuesday.
The growth was at least partially driven by legislated tax increases in several states, as well as the slowly recovering economy, the group said in the report, which was based on preliminary tax data reported by 48 states.
However, state tax revenue collections remain significantly below peak levels and are still weak in several states, including Alaska, Hawaii, Louisiana, South Dakota, Virginia, and Alabama, the institute found.
“The state tax revenue picture in the first three quarters of calendar year 2010 represented significant improvement from the collapse of the preceding quarters,” the report’s co-authors, Lucy Dadayan and Donald Boyd, said in a release.
“In most states the overall trend in tax collections for fiscal 2011 is positive. Still, the immediate outlook is for revenue collections significantly below pre-recession levels and growing spending pressures,” they wrote. “The overall picture remains: States will face continued, significant budget challenges in fiscal 2011 and beyond.”
According to the report, combined personal income, corporate income and sales tax revenue grew 3.9% for the third quarter in nominal terms compared to the third quarter of 2009, but were 7.0% below the same period two years ago.
After adjusting for inflation, the increase was 2.6%.
The gains were widespread in 42 states, led by North Dakota, with a 29.5% increase, Utah with a 19.9% gain, and West Virginia with a 17.8% increase. However in terms of dollars, New York reported the largest increase, with revenue collections rising $577 million or 4.5%.
Alaska reported the largest quarterly decline, at 48.1% , partly due to declines in oil and gas production taxes stemming from reduced commodity prices and lower production levels, the report said. Hawaii reported a 13.6% decrease, while Louisiana had a 7.5% drop.
Personal income taxes, which accounted for about 41% of the total tax revenue reported, rose 4.7% from the third quarter of 2009, but were down 6.9% from the same period in 2008.
Thirty-five states reported increases in personal income tax revenue with six showing double digit gains, based on data from 40 of the 41 states with broad-based personal income taxes.
The six states with the highest increases in personal income taxes were: Alabama, up 18.3%; Indiana, up 14.3%; Connecticut, up 13%; Delaware up 11.1%; and Georgia and West Virginia, which were each up 10.5%.
But in terms of dollars, California and New York reported the largest gains, with personal income revenue collections rising by $610 million and $315 million, respectively.
Hawaii reported the largest decline among six states showing decreases in personal income taxes, down 53.7% mostly because of delayed state income tax refunds for the 2009 tax year, according to the Rockefeller Institute report.
Sales tax collections grew by 4.1% in the third quarter compared to the same period a year ago, but were still 5.1% lower than two years ago.
Six states reported double-digit growth in sales taxes revenues, including North Carolina, Utah, Minnesota, North Dakota, Kansas and Massachusetts. Virginia reported the largest sales tax revenue decline, a 16.7% plunge, followed by Arizona, down 2.8%.
Corporate income taxes were down 2.5% for the third quarter, compared to the same period in 2009.
Among the states with corporate income taxes, 31 of 44 showed gains, while 13 reported declines.
The institute was unable to obtain data for Nevada and New Mexico.