What Can We Do About State Tax Volatility?

A shift from income tax to sales tax is not the right way to address state tax volatility. But a really good solution to this problem will involve learning not to hate property taxes.

Revenue volatility is a real problem for states and cities. Recessions cause tax revenue to decline and demand for services to rise. Because states and cities must (roughly) balance their budgets each year, this leads them to cut spending and raise taxes at the least opportune time in the economic cycle. Stable sources of tax revenue that reduce these pressures are desirable.

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