Commentary

Hold Onto Your Wallets

USA Today reports today that state revenue growth is sluggish. Collections only grew by 4.4% in the first quarter of the year, the slowest rate since 2003. Of course the real issue isn’t that revenues are off its that spending is through the roof, again. “Spending rose 7.6% in the first quarter, the highest rate since 2001. Medicaid spending, which had unexpectedly declined last year, has taken off again, rising 9.2% in the first quarter. That’s the highest quarterly growth rate for the health care program in almost a decade.” State’s additicion to spending runs deep — despite strong growth over the past few years, many states have continued to increases taxes. This is especially true of so called “sin taxes.” At least a dozen states entertained a cigarette tax increase, again. While some states still have surpluses from previous strong growth if they don’t change their spending plans (and they never do) we can see the tax man knocking on our door again…especially if a slow down in the economy doesn’t coincide with a slowdown in state spending we’re in real trouble.

Geoffrey Segal is the director of privatization and government reform at Reason Foundation, a nonprofit think tank advancing free minds and free markets. He is also editor of Reason's Privatization Watch.