The Sources of the Growth-Instability Tradeoff in State Tax Revenue

Abstract

It is widely believed that a tradeoff exists between growth rate and its instability in state tax revenue, and the degree of the tradeoff largely depends upon tax structure and tax base rules. Taking tax revenue data for fifty states over the years of 1981-1991, this paper examines the role of the state's tax structure as well as the economic condition. It is found that the state's economic condition is a far greater impact on the growth-instability relationship than the tax structure does. (H3 1 H7)