BUDGET

I. Introduction I am going to speak generally about three components of state public finance: first, tax revenue; second, government expenditures; and third, the allocation of the tax burden. I will illustrate how tax expenditures, such as sales-tax exemptions and other preferential laws, affect each component of public finance. In all of this, we must remember that budget deliberations should focus on keeping...

Red Ink Rising, the Peterson-Pew Commission on Budget Reform's report,[1] presents the country with a fiscal/employment dilemma - Congress must act immediately to stem the federal debt, but it must move carefully lest it harm employment in the fragile economy. In short, we must act fast and slow - we must decrease the debt and increase employment.[2] This is a difficult task. The Peterson-Pew dilemma (notably its...

David Gamage and Jeremy Bearer-Friend This report's primary concern is how U.S. state governments should respond to the fiscal volatility created by their balanced budget constraints. Applying the principles of risk allocation theory to this recurring problem, we conclude that states should primarily adjust the rates of broad-based taxes as their economies cycle, rather than fluctuating public spending. More specifically,...

When Proposition 13 passed in 1978, many commentators predicted disaster for California's state and local finances. Now, 30 years later, California is experiencing severe fiscal instability and a round of budget crises that has been worse than in the other states. It would be wrong to blame Proposition 13 for all of California's financial woes. Nevertheless, Proposition 13 is both an important component and a powerful...

A. The Impending Tax Crisis The Congressional Budget Office estimates that the federal budget deficit for 2009 will total $1.6 trillion, or 11.2 percent of GDP.[1] Over the coming decade, federal spending will average twice that (22.5 percent of GDP) without much chance of finding significant amounts of unpopular spending that we can cut.[2] Looking solely at 2009, federal taxes account for only half of government...

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