State and Local Tax Revenues

Mark Perry has a very interesting chart on his blog about State and Local Tax revenues.

It shows revenues will actually hit a new record in 2011. Inflation adjusted these revenues are probably still below the peak but probably not by much as we have had pretty low inflation over the last few years. So we should expect some deficits but it does indicate that increase in spending is partly responsible for the size of the deficits. This data refutes the general perception that states are facing massive revenue shortfalls.

In defense of the states, I would say that a big part of state spending is on health care which cannot be easily controlled by the states alone. Health care expenses continue to go up irrespective of the condition of the economy. Due to high unemployment, money being spent on social welfare programs is probably quite a bit higher than normal times.

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