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.
Sjoquist, David, "New Normal?
The Declining Relative
Importance of State Taxes" (2019). CSLF Working Papers. 11.