Boston Fed sees R.I. Q2 tax revenue drop of at least $287M

RHODE ISLAND's second quarter tax revenue was projected to decline between $287 million and $482.4 million year over year, depending on the rate of unemployment in the state. / AP FILE PHOTO/ANDREW HARNIK
RHODE ISLAND's second quarter tax revenue was projected to decline between $287 million and $482.4 million year over year, depending on the rate of unemployment in the state. / AP FILE PHOTO/ANDREW HARNIK

PROVIDENCE – The Federal Reserve Bank of Boston on Thursday projected Rhode Island’s state tax revenue will decline between $287 million and $482.4 million year over year in the second quarter.

The report examined three possibilities for impacted tax collections due to the COVID-19 crisis: a low-unemployment scenario, a mid-unemployment scenario and a high- unemployment scenario.

  • Rhode Island’s low-unemployment projection assumed a 16.1% unemployment rate, which would equate to a 7.8% year-over-year decline in tax revenue, or $287 million for the quarter.
  • In the middle projection, revenue is projected to decline $345.1 million year over year, or 9.4%.
  • The state’s high-unemployment projection assumed a 22.9% unemployment rate for the quarter, which was estimated to result in an 11.7% decline year over year, or $432.4 million.

Rhode Island’s projected rate of decline in tax revenue was third highest in the region, behind Massachusetts and New Hampshire.

Nominally, Massachusetts had the largest projected decline year over year in the region for the quarter, with revenue expected to fall between $2.5 billion and $4.2 billion. The smallest nominal impact in the region was in Vermont, with tax revenue expected to fall between $93 million and $182.5 million year over year.

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New Hampshire was projected to have the largest percentage decline in tax revenue for the quarter of all New England states, with estimates of between 14.5% and 19.1% decline year over year.

The declines were based on Bureau of Labor Statistic unemployment estimates for April and May, as well as U.S. census data.

The report also projects Rhode Island’s fiscal 2021 tax revenue to decline between 7.6% per capita and 24.8% per capita year over year, based on the three unemployment scenarios.

  • In a low-unemployment projection for the year, Rhode Island was assumed to have an overall unemployment rate of 9.5%.
  • In the mid-scenario, the state was predicted to have an unemployment rate of 12.5%, resulting in a 13.8% decline per capita in tax revenue for the fiscal year.
  • The high-unemployment scenario, 17.5%, would result in a 24.8% decline in tax revenue per capita.

Rhode Island’s projected fiscal year tax revenue decline rates per capita also ranked third highest in the region, behind Massachusetts and New Hampshire. Connecticut was the only state with projected growth in real state tax revenue per capita in a low-unemployment scenario in the region.

The full report may be viewed online.

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