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« Funding Palestinian Dysfunction | WILLisms.com | Heidi Franklin Update. »

Trivia Tidbit Of The Day: Part 282 -- State Tax Revenue Way Up.

States Awash In Cash-

State government coffers are filling up once again. Tax revenues are once again up thus far in 2006. Indeed, despite some of the campaign rhetoric from Democrats about how Bush's tax cuts have burdened state and local governments, revenues have been up consistently since the major 2003 federal tax relief package (.pdf):

State tax revenue in the July-September 2005 quarter grew 9.2 percent compared to the same period in 2004. This was the fastest third-quarter growth since at least 1991.

But not all regions are created equal. Some states are growing more, some are not.

The Great Lakes states and New England, mostly blue states with relatively high state tax burdens, saw the slowest revenue growth, while parts of the country with a more low-tax libertarian streak experienced the fastest revenue growth (.pdf):


More cash, all around, especially in states that weren't tempted to raise taxes during the most recent recession. Don't let them raise taxes in your state. Despite what politicians tell you, they don't need more money.

"State Tax Revenue Off to a Flying Start for Fiscal Year 2006," The Nelson A Rockefeller Institute of Government (.pdf).


Previous Trivia Tidbit: Tax Cuts For The Rich.

Posted by Will Franklin · 28 February 2006 04:05 PM


I love the charts!...

Posted by: Zsa Zsa at March 1, 2006 05:24 AM

Hey Will, how much of this can be explained by the net migration of people from the Northeast and Great Lakes states to the Midwest and Southwest, etc.

Increasingly, folks in these states are literally fleeing the higher taxes for states like Florida, Arizona, etc., that offer lower tax burdens. With stagnant populations, net migration of jobs and workers, and an increasing move of the most productive job creators and businesspeople from these states (read the Rich), some of this has to be an effect of folks wanting to get the hell out of these tax heavy states. Rob Port at Say Anything Blog had a post from the WSJ about California up today:

The latest Census Bureau data indicate that, in 2005, 239,416 more native-born Americans left the state than moved in. California is also on pace to lose domestic population (not counting immigrants) this year. The outmigration is such that the cost to rent a U-Haul trailer to move from Los Angeles to Boise, Idaho, is $2,090--or some eight times more than the cost of moving in the opposite direction.

But the worst growth killer may well be California's tax system. The business tax rate of 8.8% is the highest in the West, and its steeply "progressive" personal income tax has an effective top marginal rate of 10.3%, or second highest in the nation. CalTax, the state's taxpayer advocacy group, reports that the richest 10% of earners pay almost 75% of the entire income-tax revenue in the state, and most of these are small-business owners, i.e., the people who create jobs.

It isn't that the lower income taxes create more jobs or higher revenues on their own, it is that businesses and people have more mobility and lower taxes are like magnets to attract folks to leave areas of higher taxes. Arizona is benefitting from California's ill advised policies to the extent that California is buying billboards in Phoenix to try and recruit businesses and people to come back.

Posted by: Justin B at March 1, 2006 11:31 AM

Exactly. Policies matter. Have bad policies, and people are increasingly free to leave. Have good policies and those leaving folks will head your direction.

People generate commerce. Commerce generates tax revenues. Voila.

Posted by: Will Franklin at March 1, 2006 11:34 AM

We have way to many different kinds of taxes that eat into people. Between sales tax, property tax, Federal Income Tax, State Income tax, vehicle taxes, etc., it is often to compare the true tax burden on an individual for laymen. Factor in the true cost of compensation for an employer when they pay all their Federal and State burdens and assume that the higher their burden, the less money the employer can pay his/her employees, and these add up too.

I live like a King in Arizona, and would do just as well in Texas, but would barely be able to save for retirement in California. Sure, lots of Californians have gotten filthy rich of home price increases, and the same could be said for people in MA, NY, etc., but at the end of the day, if they stay there long enough, the hand of government will take back all that money. I could barely afford a modest 1000 sq. ft. house in San Jose or LA and for $200k own a 3000 sq. ft. mini-mansion in Phoenix. (although in 2 years, my home doubled in value to $400k)

Everything about California from their taxes to their labor laws is driving people out. Same with MA. The census bares this out and so does the tax revenues.

What we really need to talk about is the looming crisis of municipalities and the state agencies in Blue States having to deal with the rising cost of retirement pensions of state workers who increasingly don't even live in the Blue States anymore. While these areas' revenues are falling, they have a time bomb of entitlements ticking. They provide lucrative Police, Transit, Fire, and other worker benefits and these folks move to lower tax states as soon as they retire, so not only are the Blue States collecting less revenue, they are sending it with their retirees to Arizona, Florida, and Texas.

Posted by: Justin B at March 1, 2006 12:09 PM