Revenue Relief in 2018, Good GDP News and the Debt-Shy

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Revenue Relief in 2018, Good GDP News and the Debt-Shy

By Liz Farmer

For the past two fiscal years, tax revenue has lagged. A new analysis, though, predicts states may soon see some relief. A report this week by S&P Global Ratings says the climate may be right for “a revenue rebound” in fiscal 2018. A big reason, writes analyst Gabe Petek, is that investors may have held out in 2016 on cashing out stocks because they hoped a Trump presidency would give them a more favorable tax climate for their capital gains. With tax reform now looking like it’ll take longer, investors are more likely to cash out sooner. Petek says job growth and recent interest rate hikes will also benefit state income and sales tax growth in fiscal 2018.

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That’s good news given that a new analysis by the Nelson A. Rockefeller Institute of Government found that state tax revenue last year grew just 1.2 percent and actually declined by one-tenth of a percent after adjusting for inflation. It’s the weakest performance since 2010 and a major drop from 4.7 percent growth in fiscal 2015. The main culprits were weak sales and income tax revenues, according to authors Lucy Dadayan and Don Boyd. Meanwhile, corporate income tax revenue declined and now represents just 5 percent of state revenues. Keep Reading >>

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