Recent Developments May Improve State Tax Revenue Collection

The Importance of State Tax Revenue Collection to the Economic Health of the Country

A general increase of state tax revenue collection is often used as a gauge to measure the health of the economy, specifically economic growth, mainly because the national and local economic drivers have to be in place to make it possible. Tax revenue is the main funding source for the infrastructure of the state government, which provides public and social services. It is considered much more predictable than other sources of state funding, and it allows the state and federal governments to make projections and plans for the future with some modicum of certainty. State tax revenue and other factors concerning economic trends are discussed on many financial blogs, such as the one found on

The Economic Effects of Finally Having a Federal Budget Agreement in Place

One of the main reasons for the optimistic outlook on state tax revenue was the signing of the federal budget agreement on November 2, 2015. The Bipartisan Budget Act of 2015 is a two-year agreement that raises the debt ceiling and increases federal spending, essentially creating the groundwork for a period of relative economic stability, at least until the next administration is sworn into office. It ended a long period economic flux that resulted in stalled growth for business investments and consumer spending. Some of the features of the bill that lay the foundation for a state tax revenue boost are:

• The addition of almost 340,000 new jobs1 by the end of 2016
• The reduction of economic ambiguity
• An increase in consumer spending
• An increased confidence for large-scale investing

The Indications of Growth in the National Economy Support State Revenue Forecast

The signs of growth in the national economy in the third quarter of 2015 are another factor that is contributing the positive outlook for state tax revenue collection. According to the United States Department of Commerce, the real gross domestic product increased by an estimated annual rate of 1.5 percent due to an increase in spending on durable goods, especially high priced items such as vehicles and services like health care. While this small increase is a fall from the 3.9 percent reported in the second quarter, the economic forecast of an increase from 2.3 percent to over 2.5 percent by Standard and Poor’s remains in place.

Population Growth’s Influence on Employment and State Tax Revenue Forecasts

Population growth, as it relates to job growth, is another one of the key determinants of economic progress, housing and eventually state tax revenue. Standard and Poor’s2 has made a number of favorable forecasts regarding population and employment that add certainty to the economic landscape:

• The Mid-Atlantic region is last in the nation for economic growth, as always, but its employment growth is an improvement at 1.15 percent.
• The states of Washington, California and Oregon lead the Pacific region and the nation in employment gains of 2.74 percent, increasing tax revenue on the state and local levels.
• In the New England region, Boston is the center of most of the economic growth in its area, which has a job growth of 1.65 percent.
• Colorado, Idaho and Utah are the sites of significant population growth in the Mountain region, which has an expected employment growth of 2.18 percent.

An Increase in the Spending Habits of State and Local Governments Shows Promise

Another indication of growth was the 2.6 percent increase in spending by the state and local governments in the third quarter of 2015. According to Standard and Poor’s, this increase is hard proof that the financial situations of state governments have been improved to the point that they are anticipating economic growth. After many of the states completed the 2015 fiscal year with a surplus, many state budget officials expect that a stable period of growth will extend into the next fiscal year.

More information about factors that contribute to economic growth can be found in the financial blog at

  1. 340,000 new jobs
  2. Standard and Poor’s