Businesses must pay sales taxes relatively promptly, for example, so the contraction in activity has already showed up in those collections. But income tax payments arrive with a longer lag, which pushes some shortfalls into spring 2021. And while a fall in commercial real estate prices could affect property tax collections, that would play out over years.
“States and local governments are thinking of this as a multiyear problem,” said Tracy Gordon, a senior fellow at the Urban Institute. “It’s mainly because of the way tax systems work. Most are inherently backward-looking.”
Projections vary widely depending on the severity of the virus in a state; the composition of its economy; and its tax system. But most states are expecting revenue to fall in the fiscal year ending in 2021, with several projecting 10 percent to 20 percent declines, according to data compiled by the Urban Institute.
The federal government, which