Delayed tax day to bring revenue lift to cash-strapped U.S. states

By Karen Pierog

CHICAGO (Reuters) – A downward spiral in revenue in the wake of the coronavirus outbreak will pause this month for most U.S. states as Wednesday’s income tax filing deadline generates billions of dollars in payments that would have been due in April.

But looking past the burst of last-minute payments of taxes incurred in 2019 before the pandemic hit, states’ revenue outlook remains bleak as a spike in U.S. virus cases dampens hopes for a quick economic recovery.

After the federal government moved its income tax filing day to July 15 from April 15, the 41 states that tax wages also extended their deadline, with most also pushing it to July.

That was the biggest contributor to a dramatic drop in their April personal income tax collections, which fell by $44.8 billion or 62% compared with April 2019, according to the Urban Institute.

“We’re going to see much of the foregone revenue from earlier this year catching up now because so much of this was simply the delay in payments,” said Jared Walczak, vice president of state projects at the Tax Foundation.

Most states began fiscal 2021 on July 1 amid an uptick in virus cases, fanning fears of weak income tax revenue ahead.

“The tax returns next year will reflect the 2020 economy and that’s part of the reason lots of states anticipate a sharper revenue decline in fiscal 2021 than what they ended up seeing in fiscal 2020,” said Brian Sigritz, director of state fiscal studies at the National Association of State Budget Officers.

The Tax Foundation projects a 9% drop in fiscal 2021 personal income tax revenue compared with fiscal 2019.

(Reporting by Karen Pierog in Chicago; Editing by Matthew Lewis)