Chasing the Magic Bullet: What Strategies do States Use to Bring in Revenue

Abstract

In light of the spate of recent budget shortfalls caused by a litany of ballooning expenses, state governments can no longer afford to maintain their tax systems at the status quo and hope that enough revenue will come in to avoid collapse. This study seeks to identify not only which states have been most successful at raising revenue, but what methods they have used to do it, in order that other states might gain from that knowledge. Beginning with the position that a sales tax is the best tool available for states, the study evaluates quantitative regression analyses of the taxes levied by each of the fifty states from 1961 to 2010 and the resulting revenue those taxes brought in. By making the historical data the subject of the study, instead of merely an input, this paper fills a gap in the current scholarly literature on the topic of state revenue that has sought too often to project questionable assumptions into the future instead of learning from the past. The results of such an analysis will highlight the most successful ways states have been able to keep their coffers full. The study aims to provide a resource for state policymakers who, in many parts of the United States, face a ticking time bomb of future expenditures.