The Wall Street Waltz: 90 Visual Perspectives, Illustrated Lessons From Financial Cycles and Trends, Revised and Updated Edition

Chart 77

State and Local Taxes on a Steady Course

Some things just never work the way you expect them to. Take taxes for example. Not only does Congress shake up the tax code every two years, but the effluent runs down from Capitol Hill, first to the states, which often adjust their codes to the feds' jiggling, and then to the municipalities, which often look to the states as their big daddy. But whether they hike taxes or not, as we'll see in Chart 80, the changes don't turn into actual tax cuts. The clamor for tax cuts really changes very little in the overall tax picture. This chart shows why.

When you add together the various components of state and local taxes, as shown in the top line, the result is a growth rate depicted by a line as straight as a laser beam. And that line keeps growing at 11 percent per year—a doubling every 6.5 years. Income tax, sales tax, property tax, and federal government handouts are the foundation of the state and municipal tax system.

While property taxes fell when voters took the issue into their own hands at the polls, nothing else has. Individual income taxes rose 13 percent annually as the slowly rising economy and inflation forced ever more taxpayers into higher tax brackets. The same thing has happened with state corporate income taxes. In many states the rates have been increased and the booming economy keeps pushing the corporate tax take higher, at 12 percent per year with barely a jiggle along the way. Then comes federal government handouts, ...