Tax revenues in 29 states still haven’t recovered from the recession

For five straight quarters, states have collected more in tax revenues than at their pre-recession peak. But the fiscal recovery has been uneven. There are still 29 states where tax collections have yet to return to their pre-recession heights, according to a new Pew Charitable Trusts analysis.

Overall, state tax collections in the second quarter of the year were about 1.6 percent above their earlier peak, set in the third quarter of 2008. But things are more muddled when you look at each state individually.

Each reached its high-water mark for quarterly tax collections at different points. Some peaked as early as 2006, while others didn’t until well into the recession. In 21 states, those records have been surpassed. For the rest, they’re still looking to a rebound.

Alaska was farthest from its peak, with tax collections in the second quarter of this year down 69 percent from the state’s high mark. New Mexico was next, at 27 percent below its peak. Tax collections in Wyoming in the second quarter were 26 percent below their pre-recession peak.

But the opposite story holds for some states. In North Dakota, tax collections tower over the state’s previous record. There, second-quarter revenues were 119 percent higher than the pre-recession peak. Illinois enjoys a more modest 20 percent gain over its previous peak. In Minnesota, collections are up 16 percent.

There are reasons for optimism, though. As Pew notes, a summer survey by the bipartisan National Conference on State Legislatures found that budget officials in 43 states expect revenues to increase in the 2015 fiscal year. And states have it within their power to alter the course of collections:

“A return to peak tax revenue levels can result from economic growth as well as from tax increases or other policy changes. More than half of the 21 states that are collecting more money than at their inflation-adjusted peak have raised taxes since the start of the recession.”