Personal income taxes, a key revenue generator for most U.S. states, plummeted 26 percent, or $28.8 billion, in the first four months of 2009 compared to the same period in 2008, according to a Rockefeller Institute of Government report on Thursday.

As we predicted in a previous report, tax returns on 2008 income that were filed in April show huge declines, likely due to stock market-driven declines in investment income and declines in bonus payments, Institute Senior Fellow Donald J. Boyd, the report's co-author, said in a statement.

As a result, many states are likely to face more budget cutting this year, additional budget fixes next year and big budget problems when federal stimulus dollars run out in 2011, he added.

States experiencing the biggest decline in personal income tax collections in January-April 2009 compared to the same period in 2008 were Arizona, down nearly 55 percent; South Carolina, off 38.6 percent; Michigan, off 34.4 percent and California, which had a 33.8 percent drop.

Only three states, Utah, Alabama and North Dakota, collected more in the tax this year than last year.

During the same January-April time period, states paid out about $3.2 billion more in refunds than last year, the report showed.

The report was based on tax collection data from 37 of the 41 states that impose broad-based personal income taxes that are due by an April 15 tax filing deadline. On average, personal income tax collections make up roughly a third of annual state revenue, although the tax accounted for more than half of the total tax revenue collected in some states in fiscal 2008, including New York, Massachusetts and Oregon.

Preliminary data for May indicated a continued decline of about 25 percent in the income tax collections in 30 out of 34 states with available data, according to the institute, which is the public policy research arm of the State University of New York.

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