Total state tax revenue collections increased 21.7 percent in nominal terms and 13.9 percent in real terms in the first quarter of 2022 relative to a year earlier.

The double-digit growth in state tax revenues is from very volatile sources and is largely attributable to atypical revenue-enhancing factors such as an exceptionally robust stock market, a record number of initial public offerings, elevated inflation, the boost in spending on taxable goods, and anticipation of possible federal tax hikes.

Although the short-term outlook for state budgets remains positive, economic uncertainty paired with recent state actions, including new temporary or permanent tax cuts, could limit growth in the next few fiscal years and may require budget reversals.