There are a number of different sources of revenue for states. The biggest sources are sales tax (based on consumption), income tax (individual and business taxes based on income), property tax and “other” taxes like the tax on fishing licenses, driver’s licenses and a lot of other smaller items.
Of these, the most volatile in times of economic downturns is income tax revenue. Income tax is based on income which can go up and down. Sales tax is based on consumption and people will still need to buy certain things. Property tax is based on property values which are usually slow to change.
The states most at risk, therefore, are the state that rely most on income tax revenue. Those are Oregon and Michigan. Oregon has no sales tax, so it is especially dependent on income tax revenue.
How does your state stack up? A broke state is not good for anyone.
Without revenue, your state is going to look for more sources of revenue. You are their economic stimulus program. Some states are already raising property taxes to make up for shortfalls. What can you do about skyrocketing property taxes?
We’re also going to see states reaching across state lines for tax money as was discussed in What the Feds Give, the States Take Away.
Things are changing and it’s not just federal taxes that you need to watch.