Template-type: ReDIF-Paper 1.0

Author-Name: David L. Sjoquist
Author-Workplace-Name: The Center for State and Local Finance, Georgia State University, USA
Author-Workplace-Email: sjoquist@gsu.edu

Title: New Normal? The Declining Relative Importance of State Taxes

Abstract: The Great Recession’s substantial effect on state revenue has been well documented. State tax revenue decreased: By 2017, state tax revenue as a percentage of income was just 5.79 percent, which is 9 percent less than in 2007 and 4.66 percent less than in 2013. An obvious question is, why has state tax revenue as a percentage of income not returned to its pre-Great Recession level? There are two potential reasons: Either economic growth has not increased the tax base sufficiently or policymakers have not raised taxes sufficiently. This paper explores this question and whether the post-2008 period could be a “new normal.” I first discuss the trend in total state taxes as a percentage of income. I then discuss four specific taxes to provide a framework for discussing policy decisions.
Length: 15 pages

Creation-Date: 2019-03

File-URL: https://cslf.gsu.edu/files/2019/03/cslf1903.pdf
File-Format: application/pdf

Handle: RePEc:ays:cslfwp:cslf1903