Ratcheting State and Local Taxes
Yesterday, Mark Perry at Carpe Diem looked at state and local tax revenues. Then Don Boudreaux at Cafe Hayek observed they should be adjusted for inflation. Given my previous analysis (here, here, and here), I thought I’d chime in and adjust them for population*:
Over the entire period, real per-capita revenues rose 22%. On the graph, you can clearly see the 2001-2002 and 2008-2009 recessions. If we go peak to peak in the last business cycle, 2001 to 2007, the growth was 13%. If we go trough to trough, 2002-2009, the growth was 9%.
Notice that even from the peak of the previous business cycle in 2001 to the trough of the current business cycle in 2009, real per-capita revenues were still up 6%. So the recession is clearly not the proximal cause of the state and local budget problems.
State and local government agencies have more inflation-adjusted dollars per person today than they did at the peak of the boom in 2000.
Their revenues are consistently growing. The problem is that they can’t get their damned spending under control!
* State and local government tax revenue from this Census Bureau data. 2000-2009 population estimates from here. 1990-1999 from here. Ironically, 2010 population data is not yet available so I couldn’t generate a per-capita datapoint for 2010. I used the CPI-U series for inflation. I did all the analysis in this spreadsheet file.