Tuesday, March 29, 2011

States Broke? Maybe They Cut Taxes Too Much

2 comments:

TJE said...

But:

http://wallstreetpit.com/68853-state-and-local-tax-revenues-set-record-in-qiv

Patrick_L said...

"In another sign that the U.S. economy has made a full recovery from the 2007-2009 recession..."
-Really? Really?

Also, there's huge variation among states. Many states have taken a balanced approaching, raising tax revenues in addition to cutting spending (which explains part of the recovery of state revenues). Other states are trying to do budget-balancing through 100%+ spending cuts, which is just plain stupid.

States are only just recovering revenue problems from the cyclical deficits created by the economy's downturn. However, states still need to manage their long-term structural deficits. The causes of those structural deficits vary from state to state. California's problem is definitely more on the spending side, while many other states like Arizona, Nevada and Colorado (a special case due to TABOR) suffer from long-term revenue problems. Many states excessively cut taxes at the height of the economic boom when they should have been taking better steps to shore-up their rainy-day and pension funds.