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The growth and volatility of state tax revenue sources in the Tenth District

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  • R. Alison Felix

Abstract

With the sluggishness in the national economy in 2008, many state governments are projecting budget shortfalls for the 2009 fiscal year. This trend is a concern to policymakers, as the health of a state's tax revenues is important to its economic growth and its ability to finance the public services that residents demand. State governments provide physical infrastructure, educate the future workforce, and protect people and property. In addition, in the Tenth Federal Reserve District, state and local governments employ over 16 percent of the workforce. ; While a number of factors influence the growth and volatility of state tax revenues, one key determinant is the composition of each state's tax portfolio. Governments desire a portfolio of tax instruments that allows for revenues to grow with the economy so that spending demands can be met without much change in tax rates. At the same time, stability in the revenue stream is important so that governments are not left with large financing constraints during downturns. ; Felix analyzes the impact of portfolio composition on the growth and stability of state tax revenues, particularly in the states that make up the Tenth District. She uses long-run and short-run elasticity estimates to analyze the growth and stability of each tax instrument and discusses implications for Tenth District states.

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Bibliographic Info

Article provided by Federal Reserve Bank of Kansas City in its journal Economic Review.

Volume (Year): (2008)
Issue (Month): Q III ()
Pages: 63-88

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Handle: RePEc:fip:fedker:y:2008:i:qiii:p:63-88:n:v.93no.3

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  1. Donald Bruce & William F. Fox & M.H. Tuttle, 2006. "Tax Base Elasticities: A Multi-State Analysis of Long-Run and Short-Run Dynamics," Southern Economic Journal, Southern Economic Association, vol. 73(2), pages 315–341, October.
  2. Alan J. Auerbach & James R. Hines Jr., 2001. "Taxation and Economic Efficiency," NBER Working Papers 8181, National Bureau of Economic Research, Inc.
  3. Don Fullerton & Gilbert E. Metcalf, 2001. "Tax Incidence," Discussion Papers Series, Department of Economics, Tufts University 0106, Department of Economics, Tufts University.
    • Fullerton, Don & Metcalf, Gilbert E., 2002. "Tax incidence," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 26, pages 1787-1872 Elsevier.
  4. Dye, Richard F. & McGuire, Therese J., 1991. "Growth and Variability of State Individual Income and General Sales Taxes," National Tax Journal, National Tax Association, vol. 44(1), pages 55-66, March.
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Cited by:
  1. Fricke, Hans & Süssmuth, Bernd, 2014. "Growth and Volatility of Tax Revenues in Latin America," World Development, Elsevier, vol. 54(C), pages 114-138.
  2. Fricke, Hans & Süssmuth, Bernd, 2013. "Growth and volatility of tax revenues in Latin America," Working Papers 124, University of Leipzig, Faculty of Economics and Management Science.
  3. Stuart Landon & Constance Smith, 2010. "Energy Prices and Alberta Government Revenue Volatility," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 313, November.

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