Robert Buschman & David L. Sjoquist (both of Georgia State University, Andrew Young School of Policy Studies), Recent State Legislative Tax Changes in the Face of Recession, 63 State Tax Notes 623 (Feb. 20, 2012):

The period from 1990 to 2011 witnessed three recessions and two spells of substantial economic growth, conditions that are reflected in fluctuations in state tax revenue. Basic accounting implies that a state government can respond to decreases in revenue by reducing its expenditures, drawing down on reserves, or increasing taxes or fees. States varied in how they responded to the recent changes in revenue they faced during the Great Recession, with some states enacting substantial tax and fee increases, and others relying more heavily on cuts in expenditures and on use of reserves. In this report we explore the variation across states in legislative tax changes during the period 1999 to 2010, with a particular focus on changes made in the face of the Great Recession.1 In the next section, we describe the legislative changes that states made to their revenue system during the past decade. In Section III we present a simple framework that suggests what factors may explain differences in states' legislative tax changes, while Section IV presents some evidence of how the factors are related to legislative tax changes in 2009-2010.

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