State Income Tax Receipts Grew Big in First Quarter

Not necessarily good news, though


Good news for state budgets: State personal income tax collections grew 17.6 percent in the first quarter of 2013, compared to the same period a year earlier. That's the strongest growth in over six years, according to a new report from the Rockefeller Institute of Government at SUNY-Albany.

This is going to take pressure off state budgets. But there are two big caveats.

First, the national rise is heavily driven by a huge income tax increase that California implemented in January. California's personal income tax receipts soared 52 percent (which is why California now has a budget surplus); for the rest of the country, receipts were up 9 percent, which is still strong but not as eye-popping.

Second, some of the big drivers of the national strength were temporary. Federal income tax increases for 2013 encouraged wealthy people to shift their income into 2012, for example by realizing capital gains. This boosted both state and federal tax revenues for the last two quarters and will likely do so again for the current quarter—but not forever.