Revenues that fuel the state budget are growing so slowly that they are not even keeping pace with population-plus-inflation growth, according to Barry Boardman who is the chief economist for the state legislature’s non-partisan Fiscal Research Division. Weak economic growth and tax cuts are keeping state revenues low, Boardman explained during a presentation that he gave to lawmakers earlier this week.
More tax cuts are looming too—a move that will sustain the damaging trend of slow revenue growth that makes it harder to meet basic needs and build a stronger economy. The House and Senate leadership put forward budgets that included additional tax cuts totaling approximately $652 million and $950 million, respectively, over the next two years.
The presentation shows that during the immediate years before the Great Recession, state revenues were growing faster than the inflation-plus-population benchmark. At that time, the state tax code was better suited and comprised of a progressive income tax based on ability to pay. The trend reversed after the 2008 fiscal year, with the population-plus-inflation growth rate outpacing revenue growth. The economic downturn caused revenues to plummet. And before revenues were able to fully recover back to pre-recession levels, lawmakers cut taxes deeply as part of the 2013 tax plan.
Revenues are not expected to outpace population-plus-inflation growth in either of the next two years; they are expected to remain below the long-run historical average. Read More