State Fiscal Systems and Business Cycles

Research Report

State Fiscal Systems and Business Cycles

Implications for State Welfare Spending When the Next Recession Occurs

Abstract

This paper examines state revenues, expenditures, and economic cycles over a recent 18-year period. The authors ask what will happen to state welfare spending when the next recession occurs. The history of state revenues and expenditure during recessionary periods indicates that most states will raise taxes in order to maintain spending. Whether states will increase taxes to maintain welfare payments is unclear.

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