Brief Economic Conditions and State Tax Policy
Experience over the Last Decade and Implications for the Future
David Merriman
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States responded to economic recessions by legislating increased sales and income taxes. When the economy improved, states rolled back much of the income tax increases while leaving the sales tax increases in place. Despite this pattern, sales tax revenues grew less than income tax revenues because of long-term declines in the sales tax base resulting from, among other things, increased Internet and catalog sales. In the future, pressure on the income tax may increase, since the importance of sales tax is diminishing as a source of revenue and sales tax rates are already high.
Research Areas Taxes and budgets
Tags State and local tax issues Federal budget and economy