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

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  • Jeffrey Clemens
  • Stan Veuger

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

  • Jeffrey Clemens & Stan Veuger, 2020. "Implications of the Covid-19 Pandemic for State Government Tax Revenues," NBER Working Papers 27426, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:27426
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    As found on the RePEc Biblio, the curated bibliography for Economics:
    1. > Economics of Welfare > Health Economics > Economics of Pandemics > Specific pandemics > Covid-19 > Economic policy > Tax revenue

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    Cited by:

    1. Abel Brodeur & David Gray & Anik Islam & Suraiya Bhuiyan, 2021. "A literature review of the economics of COVID‐19," Journal of Economic Surveys, Wiley Blackwell, vol. 35(4), pages 1007-1044, September.
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    3. Nora Gordon & Sarah Reber, 2020. "Federal Aid to School Districts during the COVID-19 Recession," National Tax Journal, National Tax Association;National Tax Journal, vol. 73(3), pages 781-804, September.
    4. Tracy Gordon & Lucy Dadayan & Kim Rueben, 2020. "State and Local Government Finances in the COVID-19 Era," National Tax Journal, National Tax Association;National Tax Journal, vol. 73(3), pages 733-758, September.
    5. Kajal Lahiri & Cheng Yang, 2021. "Boosting Tax Revenues with Mixed-Frequency Data in the Aftermath of Covid-19: The Case of New York," CESifo Working Paper Series 9365, CESifo.
    6. Angelov, Nikolay & Waldenström, Daniel, 2021. "The Impact of COVID-19 on Economic Activity: Evidence from Administrative Tax Registers," Working Paper Series 1397, Research Institute of Industrial Economics.
    7. Michael D. Bordo & John V. Duca, 2021. "How the New Fed Municipal Bond Facility Capped Muni-Treasury Yield Spreads in the Covid-19 Recession," NBER Working Papers 28437, National Bureau of Economic Research, Inc.
    8. Dariusz Piotrowski, 2021. "Shaping the Public Perception of Economic Phenomena During the COVID-19 Pandemic: Priority of Goals or Values?," European Research Studies Journal, European Research Studies Journal, vol. 0(Special 1), pages 528-564.
    9. Lalisa A. Duguma & Meine van Noordwijk & Peter A. Minang & Kennedy Muthee, 2021. "COVID-19 Pandemic and Agroecosystem Resilience: Early Insights for Building Better Futures," Sustainability, MDPI, vol. 13(3), pages 1-22, January.
    10. Etienne Farvaque & Hira Iqbal & Nicolas Ooghe, 2020. "Health politics? Determinants of US states’ reactions to COVID-19," Post-Print hal-03128875, HAL.
    11. repec:aei:journl:y:2020:id:1008578025 is not listed on IDEAS
    12. Marina Yu. Malkina, 2021. "How the 2020 pandemic affected tax revenues in Russian regions?," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 16(2), pages 239-260, June.
    13. Arbolino, Roberta & Caro, Paolo Di, 2021. "Can the EU funds promote regional resilience at time of Covid-19? Insights from the Great Recession11We thank the Editors and the four anonymous referees for helpful comments. We also thank Emanuele C," Journal of Policy Modeling, Elsevier, vol. 43(1), pages 109-126.
    14. Ivan T. & Tom Zimmermann, 2021. "The "Privatization" of Municipal Debt," ECONtribute Discussion Papers Series 062, University of Bonn and University of Cologne, Germany.
    15. Marta Lachowska & Wayne Vroman & Stephen A. Woodbury, 2020. "Experience Rating and the Dynamics of Financing Unemployment Insurance," National Tax Journal, National Tax Association;National Tax Journal, vol. 73(3), pages 673-698, September.
    16. Nora E. Gordon & Sarah J. Reber, 2020. "Federal Aid to School Districts During the COVID-19 Recession," NBER Working Papers 27550, National Bureau of Economic Research, Inc.
    17. Green, Daniel & Loualiche, Erik, 2021. "State and local government employment in the COVID-19 crisis," Journal of Public Economics, Elsevier, vol. 193(C).
    18. Howard Chernick & David Copeland & Andrew Reschovsky, 2020. "The Fiscal Effects of the COVID-19 Pandemic on Cities: An Initial Assessment," National Tax Journal, National Tax Association;National Tax Journal, vol. 73(3), pages 699-732, September.

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    More about this item

    JEL classification:

    • H10 - Public Economics - - Structure and Scope of Government - - - General
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H79 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Other

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