With its population still less than a quarter of New York City’s, the state of Idaho is emerging as the biggest winner of the nation’s historic economic rebound from the pandemic.
Riding a demographic shift that predates COVID-19, Idaho has seen its sales tax collections increase by almost 40% compared to pre-pandemic levels, the most out of 43 states tracked by the Urban Institute. The state now has a $1.9 billion budget surplus and brought in more than $5 billion of revenue in the 2021 fiscal year, its largest intake ever.
“For months we had been expecting the growth to drop off and it hasn’t yet,” said Alex Adams, administrator of Idaho’s division of financial management.
The state, along with neighboring Utah, has seen a population boom from West Coast transplants. That trend accelerated during the pandemic as work location became agnostic. And when new residents moved there in the last two years, they brought with them pandemic-driven spending habits on goods that are more often taxed — like buying a couch or a work-from-home desk instead of a vacation.
Now Idaho and other Mountain region and Sunbelt states are seeing huge gains in sales tax revenue as their populations swell and inflation makes retail goods more expensive, buoying budgets at a time when shifting demographics inevitably pressures infrastructure needs. How they choose to spend or save those windfalls will shape their economic rebound for years to come.
Idaho’s population grew 3.4% between April 2020 and July 2021, the fastest in the nation by more than a percentage point. It has swelled by 17% in the decade since the 2010 census. That has local officials asking voters to borrow money from Wall Street to pay for increased capacity issues.
The Vallivue School District, where four out of seven elementary schools are over-capacity, on Tuesday is
“Of course, the number one winning state is Idaho no matter what,” said Lucy Dadayan, senior research associate with the Urban-Brookings Tax Policy Center at the Urban Institute.
Idaho saw home prices rise 32.2% year over year in August 2021, according to CoreLogic’s Home Price Index
“Some large cities became super expensive to live in and people moved to smaller areas that were more affordable, they wanted a lifestyle and amenities that were different and COVID accelerated that dramatically,” said Natalie Cohen, president of National Municipal Research, Inc., a consulting firm.
Idaho and its neighbors aren’t the only states seeing a bounty in sales tax collections. Domestic tourism fueled a 34% increase in Florida’s sales tax revenue in 2021, compared to 2020, a key source of funds as the state doesn’t levy a personal income tax. Florida cataloged nearly 118 million domestic visitors in 2021, the highest in state history, according to data released in February.
Across the country, 2021 sales tax collections were up 23% for the March to December period, compared to a year prior, and 20% when compared to pre-pandemic levels, according to Urban Institute data.
Texas collected nearly $3.23 billion of sales taxes in February, an all-time high for that month that followed the nearly $4 billion record collected in January, according to state data. Sales taxes are the largest source of funding for Texas and make up almost 60% of all tax collections.
“Business and consumer spending remain robust, with receipts from most sectors having strongly surpassed pre-pandemic levels,” Texas Comptroller Glenn Hegar said in a statement. “Double-digit growth continued in receipts from home improvement and electronic shopping, segments that have been boosted by pandemic spending patterns.”
Inflation is also contributing to more revenue since sales taxes are charged as a percent of retail prices and when those prices climb because of inflation, so does the amount collected from the levy. Consumer prices rose 9% in the Mountain Region in January, well above the national average of 7.5%, which marked the largest gain since 1982, according to Labor Department data.
The Urban Institute’s Dadayan said that the surge in sales tax receipts is likely temporary. “I believe we are in a fiscal bubble. The current picture is strong but whether it’s sustainable or not — that is a big question and I think it’s not.”
