Commentary

State Revenues Continue to Fall

The Wall Street Journal reports:

State and local tax revenues fell 7% in the third quarter of 2009 from a year ago, the Census Bureau said in a report underscoring how the economic downturn is stressing government collections.

Sales taxes declined 9% to $70 billion in the third quarter compared with the year-ago period, the Census Bureau said. Income taxes plunged 12% to about $58 billion. Together, sales and income taxes make up roughly half of state and local tax revenue.

And from that follows budget deficits. Because it is virtually an iron law of state financial management that they spend everything they bring in, rainy day funds can’t backfill any significant downturn, and of course, cutting spending is always catastrophic.

Now, more than ever, is the time for budget discipline and privatization.

Adrian Moore

Adrian Moore, Ph.D., is vice president of policy at Reason Foundation, a non-profit think tank advancing free minds and free markets. Moore leads Reason's policy implementation efforts and conducts his own research on topics such as privatization, government and regulatory reform, air quality, transportation and urban growth, prisons and utilities.