Commentary on "can state and local governments rely on alternative tax sources?"

State finance ; Local finance

State government finances: World War II to the current crisis

This article will explore the extent, causes, and proposed solutions of the current fiscal crisis from a historical perspective of state finance. Although the current fiscal crisis is severe, it becomes more difficult to assess unless one has a more complete understanding of the historical changes that have occurred in state revenue streams. This article will address the role of major revenue sources in the context of the current slowdown and also investigate how reliance on various revenue sources has changed over the past 50 years. The role of non-traditional revenue sources, such as state lotteries and casino gambling, will also be discussed. The article further addresses various fiscal institutions, such as tax and expenditure limitation laws, rainy day funds, and balanced budget rules, and explores the role each play in state budgeting and finance.Taxation ; Budget ; Finance, Public

Red ink in the rearview mirror: local fiscal conditions and the issuance of traffic tickets

Municipalities have revenue motives for enforcing traffic laws in addition to public safety motives because many traffic offenses are punished via fines and the issuing municipality often retains the revenue. Anecdotal evidence supports this revenue motive. We empirically test this revenue motive using panel data on North Carolina counties. We find that significantly more tickets are issued in the year following a decline in revenue, but the issuance of traffic tickets does not decline in years following revenue increases. Our results suggest that tickets are used as a revenue generation tool rather than solely a means to increase public safety. ; Formerly titled: Are traffic tickets countercyclical?Local government

State government finances: World War II to the current crises

This article examines the current state budget crises from a historical perspective. The role of major expenditures and revenue sources in the context of the current slowdown and how reliance on various revenue sources has changed since World War II are addressed. Tax revenue variability over the business cycle and the use of nontraditional revenue sources, such as state lotteries and casino gaming, are also discussed. The article further comments on the role of fiscal institutions, such as tax and expenditure limitation laws, rainy day funds, and balanced budget rules, in state budgeting and finance.Taxation ; Budget ; Finance, Public

How well are the states of the Eighth Federal Reserve District prepared for the next recession?

Economic downturns often force state policymakers to enact sizable tax increases or spending cuts to close budget shortfalls. In this paper the authors make use of a Markov-switching regression model to empirically describe the expansions and contractions in the states of the Eighth Federal Reserve District. They use the estimated parameters from the switching regressions to form probability distributions of the revenue shortfalls states are likely to encounter in future slowdowns. This allows them to estimate the probability that each state's projected fiscal-year-end balances will be sufficient to offset the fiscal stress from a recession.Business cycles ; Recessions ; Federal Reserve District, 8th

A spatial analysis of state banking regulation

We use a spatial model to investigate a state’s choice of branch banking and interstate banking regimes as a function of the regime choices made by other states and other variables suggested in the literature. We extend the basic spatial econometric model by allowing spatial dependence to vary by geographic region. Our findings reveal that spatial effects have a large, statistically significant impact on state regulatory regime decisions. The importance of spatial correlation in the setting of state banking policies suggests the need to consider spatial effects in empirical models of state policies in general.Banks and banking ; Bank supervision

Regional disparities in the spatial correlation of state income growth

This paper presents new evidence of spatial correlation in U.S. state income growth. We extend the basic spatial econometric model used in the growth literature by allowing spatial correlation in state income growth to vary across geographic regions. We find positive spatial correlation in income growth rates across neighboring states, but that the strength of this spatial correlation varies considerably by region. Spatial correlation in income growth is highest for states located in the Northeast and the South. Our findings have policy implications both at the state and national level, and also suggest that growth models may benefit from incorporating more complex forms of spatial correlation.Regional economics ; Income distribution

Reciprocity and Competition: Is there a connection?

One challenge states face in designing an income tax system is decidint how to treat non-resident earners. Numerous states have entered into reciprocity agreements with other states that exclude non-residents’ income from the tax base. These agreements provide a unique opportunity to explore the nature of state tax competition. We demonstrate that not only do reciprocity agreements dampen competition over income taxes, but the states that enact agreements also exhibit decreased levels of competition over other tax bases. This suggests that reciprocity agreements are a credible vehicle for states to act cooperatively and avoid a potential race to the bottom

DC isolation and protection system and circuit

A precision analog electronic circuit that is capable of sending accurate signals to an external device that has hostile electric characteristics, including the presence of very large common mode voltages. The circuit is also capable of surviving applications of normal mode overvoltages of up to 120 VAC/VDC for unlimited periods of time without damage or degradation. First, the circuit isolates the DC signal output from the computer. Means are then provided for amplifying the isolated DC signal. Further means are provided for stabilizing and protecting the isolating and amplifying means, and the isolated and amplified DC signal which is output to the external device, against overvoltages and overcurrents

Local Fiscal Adjustments from Depopulation: Evidence from the Post–Cold War Defense Contraction

In this paper, we estimate the long-term causal effect of population losses on local government revenue, expenditure, and debt by exploiting a quasi-exogenous change that reduced the number of US military personnel by about 40 percent between the late 1980s and 2000. Aggregating across governmental units within commuting zones, we find that real per capita total revenues and expenditures remained unchanged for remaining citizens. At the same time, however, we note several important compositional effects. First, local governments appear to have offset reductions in state intergovernmental aid by increasing property tax revenues. Second, they significantly shifted the composition of expenditures by making disproportionately large cuts in capital spending, including cuts in K–12 education, to maintain levels for current operations. Third, localities increased their long-term nonguaranteed debt to finance investments not covered by general capital outlays. Taken together, these actions run the risk of hindering a region’s relative competitiveness in the long term