Bloomberg Tax
Free Newsletter Sign Up
Bloomberg Tax
Welcome
Go
Free Newsletter Sign Up

Income Tax Collections Plummet in California and New York (3)

April 17, 2020, 3:08 PMUpdated: April 17, 2020, 9:22 PM

State lawmakers are adding their voices to calls for federal support to help weather the crisis. Here’s the latest on shifting state tax guidelines, deadlines, and policy to deal with the coronavirus pandemic. For Thursday’s coverage click here. Here’s a state-by-state roadmap.

California’s April 16 income tax revenue plunged by 87% compared to the same day in 2019, according to the Franchise Tax Board.

Daily income tax payments totaled $614 million, Chris Smith, a spokesman for the board, said Friday. That was down from the $4.7 billion collected one year ago.

Tax payments have slowed since California delayed its deadline to file and pay 2019 taxes to July 15 from April 15 in response to the health crisis. The April 16 fall is the largest daily drop so far this year, one of several indicators that the economic hit to state finances will be severe.

So far in the pivotal month of April, the tax board’s refund payments have outstripped 2019 tax payments and first quarter 2020 estimated tax payments by $400 million, according to the Legislative Analyst’s Office.

Employer tax withholding on wages is down 10% from March 23 to April 15 compared to the same period last year, according to the LAO, the nonpartisan fiscal and policy adviser to the legislature. The State Controller administers withholding.

“I think you can expect to see very substantial downward revisions to the revenue estimates a bit later this year,” Gabriel Petek, legislative analyst, said Thursday in a special hearing of the Senate Budget Committee on the financial impact of Covid-19.

Total revenue losses to the state could reach $35 billion in the near term and reach $100 billion over the next few years, Petek told lawmakers. The current state reserve fund is $17.5 billion.

State officials say California has enough of a cash cushion to avoid borrowing for now and the financial picture will be more clear after the July 15 deadline to file and pay 2019 taxes.

New York Revenue Far Below Normal

New York’s cash flow is down by about $10 billion due to the pandemic and delayed tax filing deadline, the state’s top budget official said Friday.

About seven million people filed by the state’s original April 15 tax deadline, roughly three million fewer than normal, Robert Mujica, the state budget director, said at a virus briefing, adding: “Those that filed are probably getting refunds, so the ones that didn’t file are most of that revenue.”

The state’s tax filing deadline was pushed to July 15, in line with the revised federal due date.

State lawmakers earlier this month passed a $177 billion budget for fiscal 2020-21, which began April 1. The plan included a $10 billion reduction in spending and permission for the state to adjust allocations throughout the year to cope with reduced cash flows.

The state has needed to prioritize its spending and focus on funding essential programs, even as it addresses the pandemic, Mujica said.

“We’re going to put in place spending controls actively right now, so we can make sure that we can continue on a cash basis,” he said. The state overall is projecting a revenue shortfall—even after the cashflow decline—of between $10 billion and $15 billion, he said.

“We’ll put out a financial plan that reflects that, and then we’ll have to make reductions in the event that there is not federal revenue,” Mujica said.

Texas Calls for ‘Good Faith’ Payments

The Texas Comptroller’s Office is asking businesses to pay at least a portion of their collected March sales taxes and to contact the agency to discuss staying in compliance and avoiding interest and late fees on taxes due.

“We ask that you file the sales tax returns that are due on April 20, 2020, make a good faith partial payment and contact our Enforcement Hotline,” the Comptroller’s Office said Thursday on the agency’s Covid-19 emergency response website.

The agency reiterated an offer of help, first made in March, to those businesses “struggling to pay the full amount.” It said assistance was available “in the form of short-term payment agreements and, in most instances, waivers of penalties and interest.”

New York Stimulus Checks

Gov. Andrew Cuomo (D) is trying to make sure low-income New Yorkers, who didn’t receive stimulus checks, can still get their money.

The state’s Department of Taxation and Finance has created a website to assist those who likely qualify for the $1,200—but may have been ineligible for an automatic deposit due to a lack of federal tax return information. Many low-income constituents lack the information because they don’t meet the federal filing threshold of $12,000 for individuals or $24,000 for married couples.

The governor’s awareness campaign brings together several other state agencies in effort to address the issue.

State Lawmakers See Need for $300 Billion

State legislators are calling on Congress to provide at least $300 billion in direct assistance to deal with the pandemic, which is having “devastating effects on state budgets.”

The National Conference of State Legislatures released a letter Friday addressed to House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Mitch McConnell (R-Ky.). It requests swift action on a flexible relief funding package to “enable legislatures and governors to mitigate drastic declines in revenues necessary to maintain essential services to all Americans.” Federal support is needed to “invest aggressively in state economies to expedite a full economic recovery,” NCSL executive director Tim Storey wrote in the letter.

Every major source of revenue is impacted by the public health crisis, the letter noted, leading to projected revenue losses of between 15% and 20% for almost every state. Such losses will result in budget shortfalls of between $300 billion and $400 billion for fiscal year 2021, it said. On Thursday, a trio of Democratic governors—Gretchen Whitmer of Michigan, Tom Wolf of Pennsylvania and Tony Evers of Wisconsin—called on the White House to work with Congress to create a $500 billion stabilization fund to help the struggling states.

—With assistance from Sam McQuillan in Washington, D.C. and Paul Stinson in Austin, Texas.

(Adds Texas.)

To contact the reporters on this story: Michael J. Bologna in Chicago at mbologna@bloomberglaw.com; Keshia Clukey in Albany, N.Y. at kclukey@bloomberglaw.com; Laura Mahoney in Sacramento, Calif. at lmahoney@bloomberglaw.com

To contact the editors responsible for this story: Jeff Harrington at jharrington@bloombergtax.com; David Jolly at djolly@bloombergtax.com