In recent months, state revenue collections have fallen dramatically due to the economic fallout associated with the COVID-19 pandemic. Rosewicz, Maynard, and Fleming (2020) at the Pew Charitable Trusts argue that the fiscal impact experienced by each state may depend on the mix of revenues they rely on to fill their coffers in their article “Where States Get Their Money will Shape the Pandemics Fiscal Fallout (Links to an external site.).”
Each state is unique in terms of how it funds its government. For example, some states like Florida, Tennessee, and Texas tend to rely on sales taxes. Others prefer income taxes. In resource-rich states like Alaska, severance taxes play a large role. Aside from taxes, states can generate funds by either charging user fees for services or receiving federal grants-in-aid. With the COVID-19 pandemic in mind, what mix of revenue sources do you think would provide the most stability? If asked to create your own tax system, what would you recommend? Explain your choices.