Document Type

Article

Publication Date

3-1-2019

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.

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To learn more about the Andrew Young School of Policy Studies and Center for State and Local Finance , visit https://aysps.gsu.edu/ and https://ideas.repec.org/s/ays/cslfwp.html.

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