How U.S. States Can Address Tax Revenue Challenges in 2025
State tax revenues have been declining at an alarming rate, with fiscal year 2024 marking the first consecutive annual declines for most states since the Great Recession. According to The Pew Charitable Trusts, 38 states in the U.S. now report tax collections falling below their 15-year growth trends, exacerbating fiscal uncertainty and increasing pressure on state budgets. As governments grapple with revenue shortfalls, innovative technology like IVIX can play a pivotal role in addressing tax non-compliance, stabilizing revenues, and fostering a more equitable tax system.
Challenges Highlighted by Pew’s Report
While Pew’s report indicates the extreme revenue volatility of the last few years may be improving, it also reveals an increasing number of states are experiencing long-term downward trends in revenue, rising from just one state in 2022 to 38 in 2024. The report notes three contributing factors:
1. Widespread revenue declines: Tax collections fell in 21 states during fiscal 2024, continuing the downward trend from 2023. Consecutive declines have forced states to reassess their tax collection and enforcement strategies.
2. Volatility in key tax collection sources: States experienced fluctuations in personal income tax and corporate tax collections, both of which are highly sensitive to economic changes.
3. Budgetary pressures: Declining revenues have led states to dip into reserves or consider spending cuts, potentially jeopardizing essential public services such as education, infrastructure, and healthcare.
These issues put tax authorities in a challenging position. With limited resources, declining revenue, and budget constraints, never has efficiency been more important.
How IVIX is Helping Tax Authorities Overcome Revenue and Resource Challenges
Leveraging Open-Source Intelligence(OSINT) and advanced technology designed specifically for the tax industry, IVIX helps tax authorities in the U.S. and around the world more efficiently and effectively identify and address tax non-compliance across high-impact sectors. IVIX does this by:
1. Identifying non-filing businesses: IVIX analyzes publicly available data—such as business directories, online transactions, and financial activities—to identify businesses operating without proper tax registration or failing to file tax returns. For example, IVIX detects cash-only businesses or informal operators that evade tax reporting requirements.
2. Identifying underreported income: By cross-referencing declared revenues with digital footprints, IVIX flags discrepancies in reported income, enabling targeted audits. Remarkably, IVIX has a 99% accuracy rate in correctly identifying tax non-compliance, meaning tax authorities can apply their limited resources to pre-vetted, high-impact cases.
3. Flagging sales tax collection issues among online sellers: IVIX identifies eCommerce sellers that either do not charge sales tax or charge the wrong amount, helping states ensure compliance with tax laws while rapidly improving revenue collection.
4. Automation of compliance checks: IVIX streamlines tax audits by providing pre-verified leads and documented evidence of business activities, reducing the burden on state tax enforcement teams while streamlining audits and investigations.
5. Monitoring emerging revenue streams: IVIX identifies untapped or under-regulated sectors, such as crypto, gig economy workers, digital services, and short-term rental platforms, ensuring comprehensive coverage in high-impact markets.
By leveraging IVIX, states can achieve measurable improvements in revenue collection and enforcement efficiency:
· Increased Revenue: Using IVIX, tax authorities have identified over $1 billion in previously unknown business activity, equipping authorities to recover millions in lost tax dollars.
· Improved Efficiency: IVIX enables authorities to streamline audits and accelerate investigations by automating data analysis and lead generation, freeing up limited resources for more strategic and high-impact enforcement efforts. In short, IVIX empowers tax authorities to do more with less.
· Enhanced Taxpayer Equity: IVIX solutions target high-priority markets and the highest-impact cases, so tax authorities can pinpoint non-compliance more accurately and rapidly, reducing the tax burden on compliant taxpayers.
· Greater Transparency: IVIX equips authorities with the tools they need to build public trust through proactive, data-driven approaches to tax enforcement.
A Sustainable Path Forward
The challenges highlighted in Pew’s report demand proactive solutions to address declining revenues and increasing budgetary pressures. IVIX provides tax authorities with a modern, scalable platform to rapidly uncover tax non-compliance, ensuring fiscal stability while optimizing efficiency and maximizing effectiveness. By adopting advanced technologies like IVIX, states can boost revenue collections while maintaining transparency and efficiency in their tax systems.
This approach not only addresses immediate fiscal challenges but also establishes a strong foundation for long-term financial health and sustainability.
