COVID-19 Threatens Tax Base of US States' Budgets

Individual US state tax policies shape the vulnerability of local economies to systemic shocks like the COVID-19 pandemic and, in an election year, will play out on the campaign trail as the repercussions reverberate through households, corporations, and the finance and banking industries and drive people to the the streets to protest COVID-19 economic conditions. Nine states do not tax personal income—Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming—and include the top 5 US states (in bold) based on revenue derived from sales tax. Sales tax, of course, during COVID has taken a direct hit as consumers have withdrawn, unemployment has skyrocketed, and production of goods and services plummeted. 

Below we feature the tax profiles of each of the 50 US states with a special feature on Texas to show how states vary in terms of tax base. In 2014, the State of Texas received $5.8 billion in oil and gas production taxes, more tax revenue from oil and gas production than any year since 1978, and then oil prices plummeted. Unfortunately for Texas, 2020 is shaping up to be a rough year not only for sales tax, but oil and gas production taxes. History may mean Texas is better equipped for rapid policy response, but the reality on the ground is that unemployment and a faltering economy will have real consequences no matter the immediate policy responses.