The Top 5 (Okay, 6) State Tax Charts

April 14, 2014 at 1:51 pm

As we approach Tax Day, here are six charts focusing on state taxes.

More than half of state tax dollars go to fund education (K-12 and higher education) and health care, as the chart below shows.  State tax dollars also fund other critical services such as transportation, corrections, public assistance, care for residents with disabilities, police, state parks, and general aid to local governments.

State revenue losses from the Great Recession were both deeper and longer lasting than in previous recessions, as the chart below shows.  Not until the end of 2013 did revenues finally return to pre-recession (2007) levels, after adjusting for inflation.  But, the steady revenue increases of recent years offer states an opportunity to reinvest in education and other services that sustained unprecedented cuts during the recession.

While revenues have slowly recovered in most states, Kansas has moved in the opposite direction, as the chart below shows.  Kansas slashed income taxes, especially for businesses and wealthy Kansans, even as needs — like the number of K-12 students — have grown.  Revenues fell by more than 9 percent in Kansas in 2013.  Meanwhile, there is no evidence that the tax cuts have boosted the Kansas economy.

Five of the seven states that have made the deepest cuts to K-12 education since the beginning of the recession have also enacted major income tax cuts, as the chart below shows.  These tax cuts eliminated revenue that could have helped states reverse the deep funding cuts from the recession and invest in promising education reforms.

As the chart below shows, low-income families pay significantly more of their income in state and local taxes than very wealthy families.  State and local taxes push many families into — or deeper into — poverty.

A state Earned Income Tax Credit (EITC) is one powerful tool to prevent state and local taxes from pushing low-income working families deeper into poverty.  Twenty-five states and Washington, DC, have their own EITCs, as the map below shows.  A state credit builds on the federal EITC’s proven effectiveness in helping low-income working families make ends meet.  States looking to encourage work and reduce poverty, especially among children (the federal EITC lifts more children out of poverty than any other program), should considering enacting or expanding an EITC.

Just the Basics: Where Our State Tax Dollars Go

April 11, 2014 at 9:40 am

As Tax Day approaches, we’ve updated several backgrounders that explain how the federal government and states collect and spend tax dollars.  As policymakers and citizens weigh key decisions on how best to shape our future government, it’s helpful to examine where the dollars that comprise the budget come from and where they go.

The final installment in our series of revised “Policy Basics” backgrounders explains where our state tax dollars go.

In total, the 50 states and the District of Columbia spent a little more than $1 trillion in state revenues in fiscal year 2012, according to the most recent survey by the National Association of State Budget Officers.  (This figure does not include the federal funds that states also spent that year.)

By far the largest areas of state spending, on average, are education (both K-12 and higher education) and health care.  But states also fund a wide variety of other services, including transportation, corrections, pension and health benefits for public employees, care for persons with mental illness and developmental disabilities, assistance to low-income families, economic development, environmental projects, state police, parks and recreation, housing, and aid to local governments (see chart).

The figure above shows how states spend their tax dollars on average for the entire country.  But the specific mix of spending varies from state to state, depending on such factors as how the state and its localities share funding responsibilities for public services and how much state policymakers choose to invest in health care, education, and other areas.

Click here to read the full backgrounder.

States’ Sluggish Recovery Continues

April 4, 2014 at 3:06 pm

State tax collections have finally reached their pre-recession levels, according to new data from the Census Bureau.  Those collections are now 0.4 percent higher than six years ago, after adjusting for inflation.  This news is welcome, but not cause for celebration.

The recession of 2007-09 caused deep, sustained and unprecedented revenue losses. Revenue fell a record 12 percent in the average state, even deeper in states with the hardest-hit economy.  And the recovery has been the slowest in decades (see graph).

These drastic revenue losses have prompted many states to make serious cuts to K-12 education, public colleges and universities, libraries, human services, and other public services.  The sluggish recovery means that states are serving larger populations, including more school kids and more seniors, with the same amount of money as six years ago.

Jobs Report Shows More Local School Job Losses

February 7, 2014 at 1:38 pm

Local school districts have cut hundreds of thousands of positions over the past few years and the trend is continuing, today’s jobs report shows.  Though job losses have slowed in the past two years, local governments shed 9,000 education jobs in January and have cut 40,000 jobs since the start of the school year.

School districts have eliminated over 350,000 jobs since mid-2008 (see graph), including teachers, administrators, and crucial support staff like guidance counselors, librarians, social workers, nurses, and janitors.

While school workforces shrink, enrollment continues to grow, by 800,000 students since 2008.

With fewer staff and resources and more students, overburdened schools will find it much more difficult to provide students with a quality education.

Schools Lose 15,000 Jobs in December, Extending Damage Since Recession Hit

January 10, 2014 at 2:55 pm

Today’s jobs report finds that local school districts cut 15,000 jobs for teachers, principals, and other school employees in December — a painful reminder that the recession is far from over for the nation’s schools.

Schools have cut about 300,000 jobs since the start of the recession.  Yet, the number of students they are expected to educate has increased by about 800,000 over the same period. (See chart.)

Strong schools are a crucial building block of a healthy economy.  States should be making the investments necessary to rebuild and strengthen their schools, instead of extending the damage that’s already been done.