Frugality is setting in and it is showing up in income tax refund spending and sales tax collections. Here is look at both starting with tax revenue.

CNN Money is reporting State revenue falls 4%.

Revenue of U.S. states fell 4% in the 2008 fourth quarter as sales tax collections had their biggest drop in 50 years, and 41 states were on track for revenue declines of more than triple that rate for the first quarter of 2009, according to a report released on Tuesday.

Total tax revenue declined in 35 states, while six saw double-digit declines, according to the institute, which is the public policy research arm of the State University of New York.

Initial data for the first quarter of 2009 showed 41 states reporting that overall tax collections were down 12.8% in January and February versus the same two months in 2008, the report said.

Sales tax collections, a major revenue generator for states, fell by 6.1% in the fourth quarter of 2008 from the year-earlier period. The decline was wide-spread, hitting 34 out of the 45 states with broad-based sales taxes, according to the report.

States in the far west region, which includes California, had the biggest overall tax revenue decline in the last quarter of 2008, followed by Great Lakes States, according to the institute. Collections in the Plains States had the best performance, coming in flat for the quarter.

Frugality Sets In With Refunds

An AP Poll shows Taxpayers more frugal with refunds.

Poll Findings

* Fifty-four percent of those receiving refunds said they intend to pay off credit card, utility, housing and other bills, according to an Associated Press-GfK poll released Monday. That compares with 35 percent who said the same thing a year ago.

* 38 percent of those receiving a refund said they plan to spend at least part of it. But the spending appears to be mostly on basic needs: 17 percent said they would use the money for everyday needs such as food and clothing. It was 7 percent a year ago.

* 31 percent of those receiving refunds said they will use at least part of the money to pay credit card bills, compared with 17 percent a year ago.

* 19 percent said they will use their refunds to pay utility bills, compared with 10 percent a year ago.

* 17 percent said they will use their refunds for rent or mortgage payments, compared with 7 percent a year ago.

* 11 percent of those receiving refunds said they would use them to go on vacation, a slight increase from a year ago.

* 5 percent said they planned to use their refund for a down payment on a car, also a slight increase.

* 4 percent said they would use their refunds to buy stocks or bonds, about the same as a year ago.

* 8 percent of those who owe taxes said they were very likely or somewhat likely to use a credit card to pay their tax bill.

Paying of debt is of course a deflationary event.

Mike “Mish” Shedlock
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