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State taxes not bringing budget relief just yet…

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The Rockefeller Institute reports that state tax collections increased by 5.2 percent in the fourth quarter of 2012, aided by one-time actions by investors who took capital gains at the end of the year to avoid having to pay higher federal tax rates in 2013. That’s reflected in a 10.2 percent gain in personal income tax collections in the last quarter.The good news is tempered by the institute’s warning that those late-year tax actions will probably depress tax collections somewhat this year. Moreover, despite the year-end boost, tax collections remain weak by historical standards. Adjusting for inflation, tax collections in the fourth quarter were just 0.3 percent higher than in the same quarter of 2007. Add population growth to the equation and the states are still behind in tax collections.”Revenue would have had to grow by 12.4 percent to keep up with inflation plus population growth, but in fact it grew by just 8.9 percent” in five years, the report notes.

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