Although the corporate income tax represents the smallest share state and local tax receipts, third quarter collections experienced the largest increase from the same quarter one year ago. In the third quarter of 2014 approximately $11.5 billion was collected in corporate income tax receipts or an increase of 6.2% from the third quarter of 2013. Over the same period individual income tax receipts increased 3.0%, property tax receipts increased 1.6%, and sales tax receipts increased 0.7%.
According to NAHB tabulations of the Census Bureau’s quarterly tax data, property taxes were 40.0% of state and local tax receipts from the fourth quarter of 2013 through the end of the third quarter of 2014. Sales taxes were the second largest share at 27.9% followed closely by individual income tax at 27.6%. At 4.5% corporate income taxes held the smallest share of state and local tax receipts.
Further gains are expected in all tax receipts as the economic recovery strengthens, however state and local individual income tax, corporate income tax, and sales tax collections are particularly responsive to changing economic conditions. Gains in state and local individual income tax, corporate income tax, and sales tax collections have outpaced gains in property tax receipts over the last year. This trend has pushed property taxes share of total receipts from the four major sources from a high of 44.9% in the third quarter of 2010 to the current share of 40.0%.
Lagging property assessments and annual adjustments smooth property tax collections across business cycles. Nominal property tax collections are not as prone to cyclical fluctuations as other tax collections and have steadily increased quarter after quarter. The share of tax collection from property taxes, however, fluctuates along the business cycle.
* Data footnote: Census data for property tax collections include taxes paid for all real estate assets (as well as personal property), including owner-occupied homes, rental housing, commercial real estate, and agriculture. However, housing’s share is by far the largest when considering the stock of both owner-occupied and rental housing units.
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