Jun 25 2007 12:13PM | Permalink | Email this | Comments (6) |
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State tax receipts in the Northeast, the Carolinas, the northern Rocky Mountains, Texas and Alaska grew strongly over the past year, putting these states in a good position to fund public construction projects. The jump in tax receipts also reflects solid expansion in the regional economy which generates added demand for private building space and facilities.

State tax receipts were unusually weak over the past year in the Great Lakes, the Pacific, Florida and the southern Rocky Mountains. Tax receipts declined in six states and failed to keep up with inflation in the other nine states on the bottom 15 list. This tax problem will restrain public construction spending and reflects weakening demand growth for private building space and facilities.

Total construction starts fell 11.9% from Q1 2006 to Q1 2007 in the 15 states with the weakest state tax receipts but only 8.6% in the 15 states with the strongest tax collections. Note that this group includes 7 states with almost no population growth. The weak tax receipt group includes nine states with rapid population growth. Most of the impact on construction starts from the 2006-07 economic slowdown is yet to come.

The housing collapse is largely responsible for the weak tax collections in Florida, California, Nevada and Virginia. This will persist through 2007. The manufacturing recession, now ended, is largely responsible for the weak tax collections in the Great Lakes. Soaring oil and natural gas prices put Alaska and Texas in the list of top gainers in tax receipts and will keep them there all year. The other states made the list because their housing market was a small part of the regional economy. Four northeastern states plus South Dakota are on the list because their housing markets are a very small share of the local economy. Housing is a bigger share of the local economy in the other top tax receipts states but the housing collapse was less significant because these states had modest home value appreciation in 2004-06 and hence no significant loss of speculative home buying in 2006-07.