State government crossed a milestone this year in its recovery from the Great Recession.
The state has for the first time collected more tax revenue in constant dollars than it did at its recession-era peak, according to an update Thursday of an ongoing analysis by the Pew Charitable Trusts.
The nonprofit group said tax collections in the first quarter of 2015 inched past collections from the first quarter of 2008.
“For the first time, Washington moved onto the list of states where tax revenue has recovered from the recession, with receipts 0.6 percent above their prior peak,” according to the Pew analysis.
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$5.1 billion Inflation-adjusted taxes collected by state government in both first quarter of 2008 and first quarter of 2015
Pew’s figures account for inflation and seasonal effects, which is why they are slower than official state collection reports to show a recovery. (Another variation lies in which taxes to count; Pew relies on Census data on total taxes, not just taxes that go to the state’s main account.)
But by any measure, an unusually deep recession and lackluster recovery took their toll on taxes, Washington state chief economist Steve Lerch said.
“During the recession people really cut back on what they were purchasing,” Lerch said. “It’s taken a while to get back from that.”
More recently, revenues have been growing at a reasonable clip, Lerch said. General-fund tax collections for the two-year budget period that ended in June were 9.8 percent higher than the previous two years, or 7 percent in real dollars, according to the latest state figures, which predict revenues will grow a bit faster in the current two-year period to top $37 billion.
Pew says a majority of states, 27, haven’t yet returned to peak collections. But total 50-state revenue reached that mark long ago – more than two years before Washington revenue did. That’s because of faster rebounds in populous states like California, Texas, New York and Illinois.
Growth in financial transactions helped states relying on capital-gains taxes recover faster, after the financial crisis caused sharp plunges in those same taxes, Lerch said.
That volatility is on display in Oregon’s tax collections, which fell more sharply than those in neighboring Washington but now stand nearly 9 percent higher than their peak.
Washington tax revenue may be back to where it was seven years ago, but it hasn’t kept up with the state’s economy.
General-fund revenue as a share of personal income has fallen since 1995 with a few interruptions and is on track to reach record lows.