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Nationwide, and in N.H., State Tax Revenues Not As Bad As Feared

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Dan Tuohy / NHPR
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Despite forecasts of massive tax shortfalls, a new report from the Urban Institute finds that most states did not see large declines in revenue due to the pandemic, including New Hampshire.

On average, states saw only a 0.4-percent decline in revenues in 2020 compared to the previous year, according to the new data. New Hampshire’s tax revenues fared slightly worse than the national average, declining by 1.7 percent in 2020. 

“The story is really so much dependent on the state’s economy, and the state’s tax structure, and the state’s industry reliance,” said Lucy Dadayan, a senior research associate at the Urban Institute.

Dadayan said states that count on tourism to drive government funding, including Florida, Nevada and Hawaii, saw steeper declines. States with large oil and gas extraction industries, such as Alaska, also incurred large funding shortfalls as the pandemic squeezed demand for energy.

According to Dadayan, states with progressive income tax structures saw stronger tax collections from wealthy residents, who suffered fewer job losses during the pandemic and also benefited from a strong stock market. 

Vermont and Rhode Island both saw revenues increase in 2020 by more than three percent. Maine’s tax revenues increase by 2.8 percent, while Massachusetts recorded a 1.3 percent decline in collections.

New Hampshire’s tax structure is heavily reliant on business taxes at the state level, with no income or broad based sales tax. At the onset of the pandemic, Gov. Chris Sununu warned an economic downturn could reduce state revenues by $500 million, though that worst-case scenario was never realized.

Dadayan said one other factor that may have buoyed New Hampshire’s tax collections last year were the tens of thousands of commuters who formerly travelled into Massachusetts for work, but were instead perhaps spending more in their home communities. A strong real estate market, as well as healthy liquor and tobacco tax revenues, also boosted state coffers.

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