State Tax Revenue Volatility Remains High as Long-Term Trends Moderate

The gap between recent and long-term tax revenue volatility has continued to widen. Revenue fluctuations were greater in every state from fiscal year 2020 to fiscal 2024 than they were over the 15 years ending in fiscal 2024, underscoring how the COVID-19 pandemic-driven economic shock affected virtually all tax systems. The states with the largest increases in short-term volatility compared with long-term trends tended to be those that rely most on historically volatile tax sources, but even states with traditionally stable revenue structures faced greater-than-usual swings.

Annual tax revenue growth has varied dramatically in recent years, shaped by a mix of pandemic-related disruptions, federal policy changes, and shifting economic conditions. Although short-term volatility remains elevated, longer-term trends have moderated slightly as the effects of the 2007-09 Great Recession move further into the past.

In this analysis, The Pew Charitable Trusts calculates a short-term and long-term volatility score for overall state tax revenue and for major tax revenue streams (at least 5% of tax revenue on average over the last decade) for each state. The analysis removes the estimated effect of state tax policy changes to focus on the underlying volatility of revenue that is often influenced by factors outside of policymakers’ control. Unforeseen revenue shifts, whether small or large, can create budgeting and fiscal planning challenges for policymakers. Examining the shift in volatility between the latest period and the longer-term trend can help policymakers identify the extent to which recent tax revenue fluctuations have deviated from historical norms. Policymakers should assess the factors contributing to these deviations—overall and for particular revenue streams—and examine whether they are temporary or likely to last into the foreseeable future without policy action.

Pew’s volatility score measures the variation in year-over-year percentage change for the five- and 15-year periods ending in fiscal 2024, based on a standard deviation calculation. A low score means that revenue growth rates were relatively consistent throughout the analysis period, and a high score indicates that growth rates varied more dramatically.

Overall, state tax revenue had a volatility score of 6.4 for the 15 years ending in fiscal 2024—ranging from 3.8 in Arkansas to 55.5 in Alaska—indicating that, from fiscal 2010 to fiscal 2024, the tax revenue growth rate across the states fluctuated by about 6.4 percentage points around its average. For the five years ending in fiscal 2024, the volatility score increased to 10.3—about 60% higher than the long-term trend.

Although states can influence the year-to-year growth rates of revenue through policy changes, the underlying volatility of each tax stream is often shaped by a variety of other factors beyond policymakers’ control. These include economic factors—such as the mix of industry, natural resources, workforce, and population growth—as well as changes to federal budget and tax policy and unforeseen events, such as natural disasters.

Tax revenue surged by 19.4% in fiscal 2021 and then by another 16.2% in fiscal 2022. That was followed by a 3.4% decline in fiscal 2023 and a more modest increase of 3.3% in fiscal 2024. This volatility largely stemmed from a mix of one-time and temporary factors. These included a three-month delay in the 2020 federal income tax filing deadline that shifted collections into fiscal 2021, inflating annual gains in roughly half of states; unprecedented amounts of federal aid to individuals and businesses in response to the pandemic; and a shift in personal spending habits from often-untaxed services to purchases of mostly taxable goods. Further, underlying economic conditions during the pandemic era—in particular, historically high inflation rates, low unemployment, a spike in wage growth, robust consumer spending, rising corporate profits, and strong stock market returns in 2021 and 2023—also fueled revenue fluctuations across tax streams. The slowdown since fiscal 2022 reflects the phaseout of many of these temporary factors.

These dynamics were especially evident in income-sensitive tax sources. Personal income tax collections grew rapidly in many states during the pandemic era, contributing to greater short-term volatility. Corporate income taxes—historically one of the most volatile major revenue sources—experienced an even sharper swing. From fiscal 2020 to fiscal 2024, corporate income tax collections more than tripled in dollar terms amid rising corporate profits, a rapid expansion that pushed short-term volatility well above long-term norms. As a result, corporate collections rose as a share of total state tax revenue from 4.9% in fiscal 2020 to 11.3% in fiscal 2024, well above the 10-year pre-pandemic average of 5.2%. Reflecting these shifts, the volatility score for corporate income taxes was 24.5 for the 15-year period ending in fiscal 2024, compared with 39.2 over the most recent five years.

Federal tax policy changes have also contributed to revenue volatility by shaping the tax bases on which many states rely. For instance, the Tax Cuts and Jobs Act (TCJA) drove a historic increase in volatility when, beginning in late 2017, collections experienced their largest annual swing since the Great Recession as states and taxpayers began adjusting to new liabilities. In July 2025, federal policymakers extended and modified many TCJA provisions in H.R. 1, potentially introducing new revenue fluctuations for fiscal 2026 and beyond. Because most states conform to federal definitions of income, changes in federal tax law can affect states’ personal and corporate income tax collections unless states enact legislation to counteract them.

Together, these trends indicate that during the most recent five-year period, revenue volatility was driven largely by income-based taxes. Personal and corporate income taxes exhibited substantially more volatility, and corporate income taxes contributed a larger share of total state revenue in recent years than over the long run. Sales taxes also became more volatile, though their fluctuations were comparatively modest. If these patterns persist, states may remain exposed to large revenue swings during both expansions and downturns, underscoring the importance of fiscal strategies that account for uncertainty during periods of rapid change.

State highlights

During the 15 years ending in fiscal 2024:

• The states with the highest volatility scores were Alaska (55.5), North Dakota (20.4), New Mexico (20), and Wyoming (14.8)—all natural resource-dependent economies that rely heavily on severance tax revenue.
• The lowest-ranked states for volatility were Arkansas (3.8), Maryland (3.9), and Iowa (4), which typically rely on relatively stable tax streams, especially general sales and personal income taxes, for more than half of their revenue. Property taxes also play a large role in Arkansas.

During the five years ending in fiscal 2024:

• The highest volatility occurred in Alaska (88.7), New Mexico (29.8), and California (25.5). Sharp annual changes in severance tax revenue, driven by historic fluctuations in oil prices, were a key factor in Alaska, which relies heavily on this revenue source. Previously enacted statutory changes in Alaska that took effect in fiscal 2022 may have also contributed to the magnitude of recent swings (see Notes). In New Mexico, severance taxes—which make up roughly a quarter of revenue—remained the primary source of recent swings, although personal income taxes are also a leading revenue source and showed heightened short-term volatility. In California, where personal income taxes tend to account for slightly more than half of total tax revenue, elevated volatility in income taxes was a central driver of overall revenue swings.
• The states with the lowest revenue volatility were Iowa and South Dakota (both 5), Kentucky (5.2), and Wisconsin (5.3). South Dakota’s low volatility reflects its heavy reliance on relatively stable, broad-based general sales taxes. Kentucky, Iowa, and Wisconsin also derive a substantial share of revenue from general sales taxes. They also rely heavily on personal income taxes, but those systems are less exposed to highly cyclical components of income, such as capital gains and high-income filers, than in higher-volatility states.

A comparison of state tax revenue volatility scores between the latest five-year period and the longer 15-year trend shows that:

• Every state experienced higher volatility in recent years compared with long-term trends, ranging from a 79% jump in Oregon to an increase of .1% in North Dakota. Oregon’s sharp increase stems largely from fluctuations in personal income tax collections, which make up a larger share of total collections in Oregon than in any other state, and from the state’s “kicker” law, under which strong revenue gains in fiscal years 2022 and 2023 triggered a historic rebate payout to taxpayers that contributed to a 27.6% decline in personal income tax collections in fiscal 2024.

Volatility by tax source

From fiscal 2015 to 2024, about 75% of total state tax revenue was derived from levies on personal income, general sales of goods and services, and corporate income. Each of these major tax revenue sources exhibited higher volatility scores in the latest five years compared with their long-term trends.

• Personal income taxes accounted for a major share of total tax revenue over the past decade in 41 of the 44 states that impose them. Total personal income taxes in these states had a volatility score of 10.1 for the 15 years ending in fiscal 2024, ranging from 30.3 in New Mexico to 5.1 in Alabama. This score surged by more than half to 16.9 in the most recent five-year period.
• General sales taxes, historically one of the least volatile major tax streams, represented a significant portion of total tax revenue over the past decade in all 45 states that levy them. For the 15 years ending in fiscal 2024, general sales taxes had a volatility score of 4.4, ranging from 17.7 in North Dakota to 2.9 in Maryland and Minnesota. Although the overall score ticked up to 6.1 in the most recent five years, it was relatively stable over that span compared with other revenue sources.
• Corporate income taxes accounted for a major share of total tax revenue over the past decade in 33 of the 46 states that impose them and had a volatility score of 24.5 for the 15 years ending in fiscal 2024, ranging from 74.9 in Alaska to 12.5 in Oregon. The overall score surged by more than half to 39.2 for the most recent five-year period.
• Severance taxes, which are highly dependent on global energy prices, stand out as another important revenue source for several states. Over the past decade, severance taxes were the most volatile revenue source in seven of the eight states where they accounted for enough revenue to be considered a major tax source. The seven states were Montana, New Mexico, North Dakota, Oklahoma, Texas, West Virginia, and Wyoming. Alaska was the exception, where corporate income taxes were more volatile. Collectively, severance taxes registered a volatility score of 37.8 for the 15 years ending in fiscal 2024, ranging from 55.6 in West Virginia to 26.6 in Montana. The overall score increased by slightly more than half to 58.1 for the most recent five-year period.

Drivers of overall volatility

Two of the most important factors that influence a state’s overall revenue volatility are how dramatically each tax stream changes from year to year and how heavily a state relies on each revenue source. Smaller tax streams can be highly volatile, but the more minor the tax source, the lower its impact on a state’s overall revenue volatility.

For example, the four states with the highest overall scores—energy-rich Alaska, New Mexico, North Dakota, and Wyoming—collected the largest or second-largest shares of their tax dollars over the past 10 years from highly volatile severance taxes: 50.9% of tax revenue in Alaska, 48.7% in North Dakota, 23.3% in New Mexico, and 30.5% in Wyoming. Yet Texas, the largest oil producer in the nation, ranked in the middle of states for overall revenue volatility, because although its severance tax revenue was the fourth most volatile, those collections accounted for just 8.5% of the state’s total tax collections over the past decade.

Similarly, corporate income tax was a major source of tax revenue in 33 states and was the most volatile major source in all but two of those: Montana and Oregon. However, its average share of total tax revenue was under 10% in all but six of these states: Alaska, Illinois, Massachusetts, New Hampshire, New Jersey, and Tennessee.

Why Pew assesses state tax revenue volatility

When tax collections swing widely year to year, it complicates revenue forecasting and budgeting, particularly when rapid growth is followed by sudden slowdowns. Revenue volatility is not inherently bad: States often use unexpected upswings to reduce debt, make one-time investments such as for infrastructure projects, or bolster reserves. However, these benefits depend on whether states recognize the temporary nature of volatile revenue and avoid making ongoing commitments in response to temporary gains.

Recent years have underscored how quickly revenue conditions can change. Economic disruptions, financial market swings, and shifts in income and consumption patterns can amplify volatility. Even states with historically stable revenue can experience sharp short-term pivots during periods of economic stress. As a result, understanding not just the size of revenue growth, but also its volatility, is critical for sound fiscal management.

Assessing revenue volatility helps policymakers design evidence-based savings and budget practices that account for uncertainty, such as directing one-time or above-average revenue into a rainy day fund or other budget reserve, limiting spending from highly volatile tax streams for recurring expenditures, and reserving certain volatile revenue streams for long-term or intergenerational purposes, such as sovereign wealth funds. Together with other fiscal management tools, these approaches can help state leaders smooth the effects of revenue swings, preserve budget stability, and improve long-term planning.

Mark Robyn is a senior officer and Gayathri Venu is an associate with The Pew Charitable Trusts’ state fiscal health project and Justin Theal is a senior officer and Alexandre Fall is a principal associate with Pew’s Fiscal 50 project.