By GARRY RAYNO, InDepthNH.org
CONCORD — New Hampshire revenues in the fourth quarter of calendar 2024 were significantly below its 15-year trend, according to a report by The Pew Charitable Trusts’ states fiscal health project.
New Hampshire state revenues were below the long-term trends by 5.8 percent after two years of diminishing revenues, the highest percentage of any New England state and the eighth highest decline in the country according to the report.
New Hampshire, like many states, cut tax rates during several years of record revenue increases coming out of the pandemic. Lawmakers continued rate reductions for business taxes they began a decade ago, made a one-time rate cut in the rooms and meals tax, and decided to phase out and then eliminate the interest and dividends tax at the end of calendar year 2024.
The state also felt the effects of the end of federal pandemic relief and recovery money and this legislative session is facing one of its most difficult biennial budgets to balance in about 15 years as House and Senate budget writers scramble to reach agreement on a plan that could pass the House and Senate before the new fiscal year and biennium begins July 1.
The report’s authors note after two fiscal years of revenue declines, states have had fewer resources to work with and that has limited their capacity to fund other tax cuts, expanded public services, recession preparedness and other priorities.
While revenues appear to be stabilizing after several years of pandemic induced volatility, collections are sluggish, the authors note, and performing below their long-term trends, while federal policy changes are exacerbating fiscal risks and complicating budget planning for states.
According to the report, all state tax revenue was 3.2 percent below its 15-year trend during the last quarter of calendar 2024. During the first quarter of calendar 2022 collections were 14.9 percent above the trend, which was the highest percentage in 15 years.
States underperforming their 15-year trajectories have grown steadily over the past two years with 27 states underperforming at the end of 2023 and 40 states at the end of 2024.
The report notes that the scale of the declines resembles past recessions, but the diminishing collections is happening without a recession.
Today states face a higher risk of structural deficits, where recurring revenue is insufficient to support expenditures, authors said.
The early days of the Trump administration with executive orders and policy changes have raised concerns for state leaders about the stability of federal funding, the first or second largest source or money for states, according to the report.
Locally, New Hampshire’s revenue was 5.8 percent below its 15-year trend for the fourth quarter of 2024, while Connecticut was 5.1 percent below, Massachusetts 1.1 percent below, Maine .1 percent below, Rhode Island 1.2 percent above, and Vermont 1.3 percent above.
The greatest drop was in Oregon at 19.3 percent the 15-year trend, followed by Nebraska at 10.5 percent below and Iowa at 9.2 percent, while the greatest increase was in Alaska at 163.1 percent above, New Mexico at 10.6 percent above and Wyoming at 5.9 percent above.
Across the country, 75 percent of state revenue comes from personal income taxes, general sales taxes and corporate income taxes.
In the 44 states with personal income taxes, collections were 11 percent below the 15-year trend in the fourth quarter of 2024.
The 37 states that underperformed, the figures ranged from Nebraska at 44 percent below, and Oregon at 34.7 percent below, while Oklahoma was 1.2 percent above, Massachusetts was 1 percent above and Maine .9 percent above.
Corporate income taxes were 5 percent or $2.7 billion above the 15-year trend, with the 29 states outperforming their trends ranging from 240 percent above in Alaska to 3.8 percent above in Missouri.
Seventeen states underperformed in corporate income tax collections over the 15-year window, ranging from 33.2 percent below in Mississippi to 1.8 percent below in Minnesota.
Business tax revenues for New Hampshire are well below collections from a year ago with one month to go in the fiscal year at $923 million, while last year they were $1.054 billion, a deficit of $131 million or 12.4 percent.
The official estimate for business taxes for fiscal 2025 is $1.26 billion, which is unlikely to be realized.
General sale taxes were 1.9 percent or $2.2 billion below the 15-year trend in the last quarter of 2024.
Sixteen states collected revenues above their 15-year trends from 5.1 percent in Wyoming, to 0.2 percent in New York, Utah and Mississippi.
Sales tax revenue underperformed in 29 states ranging from 8.8 percent below in Nevada to 0.2 percent below in Connecticut.
According to the report, in the fourth quarter of 2024, 27 states reported lower year-over-year inflation-adjusted tax revenue, with decreases ranging from 27.4 percent in Nebraska to 0.4 percent in Washington.
But even with declines, states generally experienced less widespread and less severe drops in the final quarter than in the same period a year earlier, which suggests that conditions may be stabilizing, the authors wrote.
“One key question facing states is whether they can still afford the long-term budgetary commitments they made during the pandemic-era revenue surge—such as tax relief and pay raises for public employees,” the authors write.
The report notes fiscal 2023 and 2024 saw the largest net state tax cuts ever recorded, while lawmakers in 40 states approved wage increases of 2 to 12 percent for state employees in fiscal 2024, up from the 37 states that raised wages in fiscal 2023 and the 25 states in fiscal 2022.
New Hampshire state employees received a wage increase of 12 percent over the biennium beginning in fiscal year 2024.
The authors also note federal policy changes are increasing fiscal uncertainty, with higher tariffs that can raise prices and operating costs, and immigration policies that may reduce the labor force in critical industries like agriculture, construction and hospitality.
Other proposed changes to tax policies like limiting municipal bond tax exemptions could increase borrowing costs.
Reductions in Medicaid funding could have a huge impact on state budgets going forward if the “big beautiful bill” is approved, the authors note.
“The years of momentous tax revenue growth came to an end in fiscal 2023, when inflation-adjusted tax revenue fell compared with the prior year—the only time in at least 40 years that real annual tax revenue has declined outside of a recession,” said Justin Theal, senior officer of The Pew Charitable Trusts’ Fiscal 50 project. “Tax revenue fell again in most states in fiscal 2024, marking the first time in at least 50 years that states experienced back-to-back real annual declines unrelated to an economic downturn.”
The report can be found here: https://www.pew.org/en/research-and-analysis/articles/2025/06/16/most-states-tax-revenue-falls-below-long-term-trends-amid-federal-uncertainties.
Garry Rayno may be reached at garry.rayno@yahoo.com.