The last tax we want to examine for volatility is the income tax. In general, state income taxes are more variable and less predictable than other taxes.
on Income Tax % of Total
14
California relies heavily on income taxes for its revenue generation, fifth in the nation. In the top-10 states measured by reliance on income tax about half appeared once on the stress list for either fiscal 2008 or fiscal 2009. The correlation is not perfect, but there is at least some indication that reliance on income taxes might be causal to swings in tax revenues. We should note that there are quite a few states on the stress list which have average or less-than-average reliance on income taxes as well. This fact just points out the difficulty of ferreting out California’s atypical shortfall situation. State tax revenue structures not only differ widely from each other and over time, and so does the character of their tax base.
Figure 5. Reliance of State Revenues
Te n n e s s e e Ne w H a m p. No r t h D a k o t a M i s s i s s i ppi Louisiana Ne w M e x i co Ve r m o n t Hawaii Arizona Arkansas We s t V i rg i n i a Alabama ‘ P e n n s yl v a n i a Ke n t u ck y Ok l a h o m a Io w a S o u t h C a ro l i n a M i ch i g a n C o n n e ct i cu t Il l i n o i s Montana Ka n s a s Ne b r a s k a R h o de Is l a n d Missouri Oh i o D e l a w a re Utah Ida h o Maine In di a n a Ne w J e r s e y Minesota M a r yl a n d W i s co n s i n G e o rg i a No r t h C a ro l i n a California C o l o r a do V i rg i n i a Ne w Yo r k Mass.
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171
70%