State and Local

State and Local

Research

Jeremy Horpedahl, Harrison Searles | Mar 06, 2014
Removing the federal tax deduction for state and local taxes would make taxes more equitable throughout the nation, as both high-tax and low-tax states are treated equally by the federal government. It may also provide an efficiency boost for states and localities, as they abandon some services that could be better provided by private companies. The removal of this deduction would also allow federal marginal tax rates to be cut across the board, providing a secondary boost to the economy while still remaining revenue-neutral at the federal level.
Justin M. Ross | Feb 25, 2014
The primer begins with a short discussion of criteria for evaluating tax revenue options (i.e., economic efficiency, equity, transparency, collectability, and revenue production). It proceeds to an overview of the different types of taxes employed at various levels of government and an evaluation of each tax against these criteria. The tax categories included here are individual income taxes, consumption taxes, real property taxes, and corporate income taxes.
Sarah Arnett | Jan 14, 2014
New research from Sarah Arnett examines states’ abilities to meet their financial obligations in the face of state budget challenges that have far outlasted the Great Recession. Fiscal simulations by the Government Accountability Office suggest that despite recent gains in tax revenues and pension assets, the long-term outlook for states’ fiscal condition is negative (GAO 2013). These simulations predict that states will have yearly difficulties balancing revenues and expenditures due, in part, to rising health care costs and the cost of funding state and local pensions.
Andreea Militaru, Thomas Stratmann | Jan 07, 2014
We analyze the choice politicians face when seeking votes from groups that lobby for sales tax rate decreases or from groups that lobby for certain tax exemptions, given the constraint that each politician wants to raise a certain amount of revenue. Using the application of sales taxes and sales tax exemptions we develop a model predicting a positive relationship between the number of sales tax exemptions and the sales tax rate. We find support for this hypothesis. A one-unit increase in the number of exemptions is associated with an increase between 0.10 and 0.25 percent in the sales tax rate. Our results provide one explanation of why estimates of revenue increases generated by a sales tax increase are often too optimistic.
Keith Hall, Robert Greene | Sep 20, 2013
Virginia’s labor market is more troubled than its unemployment rate suggests. If labor force participation were at its 2007 level, the state’s unemployment rate would be as high as 8.6 percent. We estimate that 10 percent of Virginia’s workforce is indirectly employed by the federal government via federal contract expenditures. Excluding these jobs, private job loss in Virginia since 2007 is on par with the national average.
Marc Joffe | Jun 25, 2013
The author uses an open-source budget-simulation model to evaluate Illinois’s credit risk and to compare it to that of Indiana, a neighboring state generally believed to have better fiscal management. Based on a review of the history and theory of state credit performance, he assumes that a state will default if the aggregate of its interest and pension costs reaches 30 percent of total revenues. His analysis finds that neither state will reach the critical threshold in the next few years under any reasonable economic scenario, suggesting no material default risk.

Testimony & Comments

Matthew Mitchell | Oct 04, 2011
Matthew Mitchell testified before the House Committee on the Judiciary about state governments' experiences with Balanced Budget Amendments.
Russell Roberts | Feb 16, 2011
Russell Roberts testified before the House Committee on Government Oversight and Reform on the second anniversary of the stimulus.
Eileen Norcross | Feb 09, 2011
Eileen Norcross testified before the U.S. House Committee on Oversight and Government Reform on the looming municipal debt crisis.
Richard Williams, Jerry Ellig, John Morrall | Jul 06, 2010
As always, OMB has produced a very thorough report based on the instructions provided in the Regulatory-Right-to Know Act. Nevertheless, it is time to re-examine this report to see if it can be made…
Jerry Brito | Mar 20, 2009
Senior Research Fellow Jerry Brito presents his ideas on transparency in the stimulus bill in this testimony before the House Committee on Oversight and Government…
Maurice P. McTigue | Nov 28, 2007

Research Summaries & Toolkits

Speeches & Presentations

Expert Commentary

Apr 11, 2014

States should be wary of the impact the expansion will have on their state budgets when the expansion is perceived as permanent, but the federal aid turns out to be temporary.
Mar 12, 2014

Wouldn't it be great if you could just decide that your monthly cellphone bill was too high and only pay half? That might work for a while, but eventually Verizon or AT&T would turn off your phone. Municipal governments have been trying the same thing with their pension bills, and it hasn't gone well. One result is a spate of municipal bankruptcies from Rhode Island to California, including Detroit's dramatic filing last year.
Feb 19, 2014

The Academy Awards are nearly upon us, and that means long-winded acceptance speeches from actors and directors, filled with thanks for all the people who have helped them along the way. Listen closely to those speeches. Because they should really be thanking you.
Dec 05, 2013

Judge Steven Rhodes’ ruling that Detroit may reduce pensions under Chapter 9 bankruptcy now means that all parties must face a hard mathematical reality with consequences for real people: The city cannot afford to pay the benefits it has promised. Detroit’s unfunded pension liabilities are immense, at over $9 billion on a risk-free (guaranteed-to-be-paid) basis. Unfortunately, they were valued and funded incorrectly.
Dec 05, 2013

Illinois’ pension problems are big—far bigger than the $100 billion funding gap the legislature said it tackled earlier this week with a new set of reforms. The funding gap is actually double that—well over $200 billion—when calculated on a fair-market basis. Illinois is committed to fully funding the actuarial liability (and some are encouraging the system to sue the state should the government not pay it). This is one of the reasons the state is in such a hole—they are well behind on payments, and those payments are calculated based on the overly optimistic expectation that they will earn 8 percent a year on investments.
Nov 23, 2013

Home to only one-fifth of 1 percent of the American population, North Dakota isn’t often the subject of big national news stories. The Bakken shale oil boom, though, has brought widespread attention to the Peace Garden State. In many ways, it has overshadowed a broader story: the payoff North Dakotans are enjoying from their remarkable level of economic and personal freedom.

Charts

In 2012, public-sector employment made up more than 16 percent of the US labor market. Direct government employment fails to capture the full impact of government spending on state labor markets. Using federal contract data obtained from USAspending.gov, we estimated the percentage of private sector jobs actually financed by federal contract dollars in each state. The following four maps visualize our findings.

Experts

Matthew Mitchell is a senior research fellow at the Mercatus Center at George Mason University, where he is the lead scholar on the Project for the Study of American Capitalism. He is also an adjunct professor of economics at Mason. In his writing and research, he specializes in economic freedom and economic growth, public-choice economics, and the economics of government favoritism toward particular businesses.
Eileen Norcross is a senior research fellow at the Mercatus Center at George Mason University. As lead researcher on the Mercatus Center’s State and Local Policy Project, she focuses on questions of public finance and how economic institutions support or hamper economic resiliency and civil society. She specializes in fiscal federalism and institutions, state and local governments and finance, pensions, public administration, and economic development.
The Honorable Maurice McTigue, QSO, is vice-president for outreach at the Mercatus Center at George Mason University. He is director of the Mercatus Center’s Government Accountability Project and a member of its Spending and Budget Initiative and State and Local Policy Project.
William P. Ruger is an assistant professor in the political science department at Texas State University. He has been an affiliated scholar with the Mercatus Center at George Mason University since 2008.
Jason Sorens is an assistant professor in the political science department at the University at Buffalo (SUNY). He has been an affiliated scholar with the Mercatus Center at George Mason University since 2008. …

Podcasts

Eileen Norcross | March 24, 2014
Eileen Norcross Discusses Massachusetts' Fiscal Condition on the New England Talk Show

Recent Events

Please join the Mercatus Center's Capitol Hill Campus and Professor Bruce Yandle for an update on the state of the national economy. Dr. Yandle is the Distinguished Adjunct Professor of Economics at the Mercatus Center and Dean Emeritus of Clemson College of Business and Behavioral Sciences.

Books

Media Clippings

Eileen Norcross | Feb 02, 2014
Eileen Norcross cited at The New York Times.
Sarah Arnett | Jan 17, 2014
The Mercatus Center cited at Philly.com.
Sarah Arnett | Jan 16, 2014
The Mercatus Center cited at Investor's Business Daily.
| Jan 16, 2014
Mercatus cited at Union Leader.
Adam Thierer | Oct 08, 2013
Adam Thierer cited at Politico.
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