Total Tax Collection Falls
Tax revenue in most states has fallen this year. While a decline of more than 10 percent is not unusual, the situation is far from ideal. States with high taxes are also hurt by the recent flu pandemic. The total tax revenue in the U.S. has decreased by nearly $46.4 billion since the outbreak began. The drop was exacerbated by the fact that most states had been growing during the past budget year. As a result, tax collections in the final quarter took the biggest drop in 25 years. While some of this dropped revenue was expected to regain its previous pace in the third quarter, nearly half of states project a revenue decline this fiscal year.
The decline was particularly acute in Mumbai, where tax collection dropped by 13.9% compared to the previous year. Tax revenue from corporate and personal income taxes fell by over 10 per cent, as well. Economists say the numbers were in line with their expectations and that sequential improvements are necessary given the fragile momentum of the economy. Despite the decline in tax collection, the government has managed to make up for this loss by offering higher tax rates.
The income tax department’s official website has listed the number of taxpayers with a 22.5% drop in the total tax collection in September. This is based on advance tax collection numbers for the second quarter of 2018. The first quarter’s numbers were hardly available. However, banks will update the numbers shortly. Despite the overall decline, the numbers are still better than the last few years. If you are wondering why the total tax collection in Mumbai has declined so far, this could be one of the reasons.
Listed corporates have continued to increase their profits in the last year. However, many companies cut costs with suppliers and contractors, which lowered their tax bills. As a result, profit after tax for listed companies fell from 3.1% of GDP in 2014-15 to 2.6% in 2020-21, before all companies had reported their earnings. Listed corporates, in contrast, reported profits of 1.1% of GDP last year. These are troubling times for small and medium-sized businesses.
Income tax collections totaled $121 million in May, which is $38 million below the benchmark. Income tax returns and bills, on the other hand, totaled $189 million. This is $0.7% less than the benchmark month. The decline in income tax collections is partly due to the extension of the deadline for filing last year’s returns. Sales and use tax collections were $162 billion. These are slightly higher than last year’s figures, which is a positive sign.
Moreover, the decline in income taxes is related to state corporate income taxes. S-corporations, on the other hand, are exempt from most state corporate income taxes. Large profitable corporations are able to exploit loopholes in tax laws to reduce their tax bills. These corporate tax cuts have a negative impact on local and state governments’ ability to provide basic services. And the tax burden has gone down in many states. It is clear that the tax burden in the U.S. is now less than it used to be.