State & Local Government Policy, Business and Technology

Volatility of States' Revenue Varies By Tax Stream

The Pew Charitable Trust: Yearly swings in tax revenue can confound policymakers’ best efforts to balance state budgets. These fluctuations vary greatly across the 50 states. Over the past two decades, Alaska has faced by far the greatest volatility in total tax revenue, while South Dakota has experienced the least, not counting revenue swings caused by tax policy changes.

Revenue volatility differs across states because each relies on a unique mix of tax streams. Individual tax streams experience different fluctuations from year to year, contributing to a state’s overall revenue volatility. Between fiscal years 1996 and 2015, corporate income taxes and severance taxes on oil and minerals were consistently more volatile than other major state taxes, such as those on personal income and sales of goods and services.

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