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

37 Pages Posted: 29 Jun 2020 Last revised: 10 Jun 2023

See all articles by Jeffrey P. Clemens

Jeffrey P. Clemens

University of California, San Diego (UCSD) - Department of Economics; NBER

Stan Veuger

American Enterprise Institute

Date Written: June 2020

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.

Suggested Citation

Clemens, Jeffrey P. and Veuger, Stan, Implications of the Covid-19 Pandemic for State Government Tax Revenues (June 2020). NBER Working Paper No. w27426, Available at SSRN: https://ssrn.com/abstract=3637727

Jeffrey P. Clemens (Contact Author)

University of California, San Diego (UCSD) - Department of Economics ( email )

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HOME PAGE: http://econweb.ucsd.edu/~j1clemens/

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Stan Veuger

American Enterprise Institute ( email )

1789 Massachusetts Ave NW
Washington, DC 20036
United States

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