Tax breaks in the new small business bill
Tax amnesties in D.C., Florida, Nevada and New Mexico end on Sept. 30

State tax collections have improved;
Wait, no they haven't

Both headline statements are true, depending on which state you're talking about.

Total state and local government tax revenue increased slightly for the second quarter of 2010, showing growth across most major tax categories, according to data released Monday by the Census Bureau.

But in California, the Golden State tax collector is owed $1.4 billion in sales and use taxes. That amount could really help plug some of the state's $19 billion budget gap.

The unpaid California tax money is particularly troubling, reports the Los Angeles Times, since much of the tax money has already been paid by consumers but the collecting merchants haven't turned the taxes over to the state Board of Equalization.

The bigger picture good news -- nationwide, tax revenue in the states rose 1.7 percent to $318.2 billion in the three months ended in June versus the same period a year earlier -- is seen as an indicator of some improvement in the economy.

But if the California businesses that just can't seem to let go of tax cash on hand are any indication, the economy is not back to where it needs to be.

That economic difficulty is likely to be borne out by a further look at state taxes expected to be released this week by the National Conference of State Legislatures. That report is expected to show states are projecting depressed revenue for several years.

A big problem, according to the latest Census info and detailed by the Wall Street Journal, is that many of governments' largest tax sources are growing slowly and remain well below pre-recession levels.

These latest numbers reflect much of what the Rockefeller Institute of Government reported back in August. Individual income taxes, which provide roughly a quarter of state and local revenue, grew 0.01 percent to $75.9 billion in the second quarter, roughly the same amount collected in the second quarter of 2005.

30 States Show an Increase in Revenues
April-to-June 2010 Compared to a Year Earlier


Source: Rockefeller Institute of Government

And most states showed gains in state tax collections in the second quarter of 2010 compared to a year earlier. Click the image above (or here) for a larger view.

But despite the year-over-year gains, revenues were still significantly below pre-recession levels. Preliminary figures, according to the Rockefeller Institute, show overall collections for this year's second quarter roughly 17 percent below the same period two years ago.

Complete details are in the Albany, N.Y.-based public policy research group's report, State Tax Revenues Are Slowly Rebounding.

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