Red Ink All Over the Map for State Tax Revenues

States’ tax revenues have grown at milder rates since the 1970s. This, of course, didn’t cause alarm when growth was still positive and the global economic environment was stable. Today… it’s a different story.

The map and chart below are helpful in conveying the extent of the problem. You can see most states attempted to run on a 20% or greater budget shortfall in 2010. Only two states – Montana and North Dakota – lived “within its means.”

While the map is a good representation of the breadth of the problem – few states are escaping the crunch – the percentage-change chart below the map is a great representation of the magnitude of the problem.

State tax revenues have gotten more volatile since 2000. The first swing was from +10% in 2000 to about -5% a few years later. But just as states were facing shrinking revenue… tax income shot back up, growing at 10% again by 2005.

The relief was short-lived. Tax revenues subsequently contracted by more than 10% by 2010.

Revenue volatility makes annual budget planning an impossible task. Are we going to have 5% more money to work with? Or, will we have to get by with 10% less? That’s a question no one can answer when state tax revenues are so volatile from one year to the next.

It’s unclear what the best path forward is for states struggling to balance the checkbook. That said, it’s highly likely the balancing act will continue to squeeze the average American who can expect to pay more in taxes, and receive less in benefits, over the years to come.

If you haven’t done so already read the Survive & Prosper issue on “Corporate Profits Fall + Consumer Spending Less = Higher Taxes for You and Me”.

 

 

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Categories: Economy

About Author

Adam O'Dell has one purpose in mind: to find and bring to subscribers investment opportunities that return the maximum profit with the minimum risk. Adam has worked as a Prop Trader for a spot Forex firm. While there, he learned the fundamentals of trading in the world’s largest market. He excelled at trading the volatile currency markets by seeking out low-risk entry points for trades with high profit potential. An MBA graduate and Affiliate Member of the Market Technicians Association, Adam is a lifelong student of the markets. He is editor of our hugely successful trading service, Cycle 9 Alert.