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Business Title: US States Show 2nd Straight Quarter Of Tax Gains NEW YORK -(Dow Jones)- A gradual fiscal recovery appears to be underway for states in the U.S., even as they continue to struggle with revenue below pre- recession levels, according to a new study released Tuesday by the Rockefeller Institute of Government. The second quarter of 2010 represented the second quarter in a row that states reported overall gains in tax collections on the heels of five straight quarters of declines, the public policy research arm of the State University of New York said. The gains were aided by increases in sales-tax rates in some major states. Moreover, preliminary data for July and August suggest the third quarter of 2010 may show another revenue increase, with early figures from 42 states showing gains averaging 2.8%, according to the SUNY unit. Overall state tax revenue grew 2.3% in the quarter, the institute said in its latest State Revenue Report. Thirty-four states reported revenue gains with 12 advancing at double-digit percentage rates. The two-quarter trend has begun to reverse the overall declines reported by states from the fourth quarter of 2008 through the end of 2009. Both of the largest sources of tax revenue for states produced gains in the April-June period, with sales-tax collections rising a strong 5.7% and personal income taxes up 1.6%, the study said. Yet, when the full 2009-10 fiscal year is considered, overall tax collections for the states declined from the previous year and remain below pre-recession levels. For the year ended in June 2010--the period corresponding to most states' fiscal years--tax collections declined by $19 billion, or 2.7%, from the preceding year. They also were down $84 billion, or 10.8%, compared to fiscal- year 2008. "After record revenue declines in calendar 2009, and with spending trend lines still pointing upward, the fiscal conditions of the states remain quite fragile, " said Lucy Dadayan and Donald J. Boyd, authors of the report. "While some economic indicators signal some improvement in overall economic conditions, fiscal recovery for the states typically lags a national economic turnaround and is likely to take several years." This year's second-quarter increase in sales-tax revenue marked the largest such year-over-year gain since the third quarter of 2006, the study said, but it found sales-tax revenue still down 4.2% from the same 2008 period. Legislated tax increases in California, New York, Massachusetts, North Carolina and other states added an estimated $4.9 billion to overall revenue during the second quarter. Without those changes, nationwide revenue for states would have shown a slight decline from the previous year. With revenue growth still below historical averages, Dadayan and Boyd wrote, " Many states will be forced to make more budget cuts--and to consider further increases in taxes and charges-- in the coming year."
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