The Pandemic's Impact on County Sales Tax By Dave Lucas, NYSAC Director of Finance and Intergovernmental Affairs
D
uring the strictest lockdown period of the COVID-19 pandemic, every corner of the state saw dramatic declines in activity, but as things reopened, that activity picked up quickly in some parts. of the state while others lagged. By the end of 2020 just over half of the counties saw their sales tax collections recover to prior year levels. However, for counties that did not recover, all but one was still behind at the end of February 2021. New York City and the neighboring metropolitan counties were the first to feel the impact of the pandemic. Density issues in downstate regions delayed their reopening and resulted in a slower restoration of economic activity. As regions of the state reopened the impact on taxable sales activity became evident.
Mapping the Sales Tax Recovery Table 1 highlights State of New York data for taxable sales activity for a full year under the COVID pandemic (the state taxes goods and services differently than most counties and this results in a different variety of industries contributing to sales tax than for most counties). This period represents March 1, 2020, through February 28, 2021. Total taxable sales were down by $44 billion, or 12 percent. Nearly $27 billion, 60 percent of the shortfall, occurred in the hard-hit Restaurants and Traveler Accommodation sectors, respectively, hotels & restaurants. Businesses deemed essential (big box, grocery and warehouse stores) and internet-based retail experienced stronger growth to help offset some of the losses. The statewide impact on taxable sales is swayed by New York City. The City is reliant on its commuter workforce and tourism for a significant portion of its taxable sales. Restrictions on travel and social density shut down tourism and largely eliminated foot traffic across the city. Fewer tourists and “work from home” extended the economic pain to retailers and service providers of all kinds. As the epicenter of the pandemic, New York City experienced the sharpest declines in taxable sales and has had the slowest recovery of any region of the state. Total taxable sales were down by $43.2 billion, nearly 24 percent.
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NYSAC News | Fall 2021
For the counties outside of the City the decline in taxable sales activity was much smaller, but it varied widely by county. Taxable sales were down $5.8 billion, or -2.6 percent. The losses were concentrated in travel accommodation, department and clothing stores, gasoline stations and restaurants.
Federal Stimulus Helped Boost the Economy A major contributor to the economic recovery was the enactment of Federal COVID stimulus funding. Especially critical were payments that supported individuals, businesses and state and local governments. Without federal support, the recession would have lasted longer and the damage to the economy would have been longer lasting. From the beginning of the pandemic through March of 2021, Congress and two presidents authorized $5.2 trillion in fiscal stimulus to fight the pandemic and restore the economy. To put this funding into perspective, the entire federal budget in 2019 was about $4 trillion. In the 18 months following the start of the pandemic the federal stimulus increased the average monthly growth rate in personal income by 271 percent, rising from .4 percent to nearly 1.1 percent.
Taxable Sales Recovered Gradually The easing of pandemic lockdowns in conjunction with federal stimulus enabled consumers to maintain their spending. The wide availability of vaccines provided comfort to consumers to wade back into more regular activities. As more time passed taxable sales improved, but the recovery varied considerably by county and region. Pre-COVID, taxable sales per quarter averaged about $92 billion for New York State. During the first year of the pandemic, no quarter exceeded the prior year average. The deepest lockdown months of March through May of 2020 experienced the biggest declines. This pattern held true in most counties. About half of the counties saw their sales tax activity fully recover by the end of 2020 even though certain sectors like tourism, hotel accommodation, restaurants, clothing stores and general retail continued to underperform. In aggregate, total taxable sales fell by $5.7 billion, -2.6 percent. The estimated sales tax loss was $234 million, but the impact was uneven with a range of -10.9 percent to +9.9 percent.
