States experienced little revenue growth in second quarter, research group says.

WASHINGTON -- States' revenue growth slowed dramatically in the second quarter of this year compared with the two previous quarters, the Center for the Study of the State reports.

Excluding, legislated tax changes and inflation, states' tax revenues grew by a slim 0.2% in the quarter that ended June 30, down from gains of 2.6% and 2.9% in the two previous quarters, says the report from the Albany-based research group.

"After a burst of activity in 1991, most states have avoided large tax increases or decreases in 1992 or 1993. As a result, the growth rate of revenue after removing the effects of legislation was 3.3%, which is close to the unadjusted growth rate," says the report, called the "State Revenue Report." "After eliminating the effects of inflation, the increase was 0.2%," says the report, due to be released today. The report tracks state revenues from personal. sales, and corporate income tax, which combined account for roughly 70% of total state revenues, according to the report.

Much of the slump in revenue growth in the second quarter can be accounted for by a big decline in states' personal income tax receipts, the report says. Excluding legislated changes, personal income tax revenue was up 0.3% compared to 12 months ago, it says.

Technical factors helped to depress revenue growth from personal income tax in the second quarter, the report notes. For example, taxpayers on average had more taxes withheld in 1992, which caused larger than usual state tax refunds in the second quarter of this year, the report says.

Also, some taxpayers accelerated their incomes and corresponding tax payments in 1992 to avoid anticipated higher taxes planned by the Clinton administration for this year, the report says. "This led to a spurt in state tax collections in December and January," the report says.

Growth of state revenues from sales taxes was relatively strong in the second quarter, as it was in the three previous quarters, according to the report. State sales tax revenues were up 4.9% compared to 12 months ago, the report says.

"After eliminating the effects of legislated changes, this was the fourth consecutive quarter in which sales tax revenue rose at rates between 4.9% and 5.4%, which is better than the increases before mid-1992," the report says.

Corporate tax revenues posted the strongest gain in the second quarter, rising 6.9%, the report says.

"While that is a larger increase than has been usual in the past several years, it appears rather low in comparison with the increase in reported corporate profits, which exceeded 20% in the past year," the report says.

"There is a rather long time lag between changes in profits and state tax collections."

Total state revenues in the second quarter grew in all regions, except the Far West, according to the report. "The Far West was the only region with lower revenue, primarily because of the weak California economy, although Hawaii also did very poorly," the report says.

Revenues by region varied notably. In the second quarter, state revenues gained 11.2% in the Rocky Mountain region, 9.3% in the Plains states, 6.6% in the Southeast, 5.7% in the Southwest, 4.9% in the Great Lakes states, 4.8% in New England, and 0.5% in the Mid-Atlantic region, while falling 1.1% in the Far West. These are year-over-year changes and include legislated tax changes.

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