The new revenue normal

Professor Tyler Cowen at Marginal Revolution summarizes the findings from a study about state tax revenues.  It seems that at the same level of GDP tax revenues are 10 percent below where they were pre-recession.  Taxes are derived from incomes, property and consumption, with special emphasis on certain types of 'sinful' consumption.  Our straightened circumstances have reduced private income, asset values and (dare I say it?) sin (at least the taxable form) relative to the previous equilibrium even as 'stimulus' stimulated spending continued to soar into unreality.

GDP has now recovered to pre-crash levels, but how about state revenue?

On average it has returned to 89% of peak levels.  In Louisiana it is about 72 percent of peak levels, the lowest figure in the group.  In North Dakota it is over 110 percent.  Only New Hampshire and North Dakota are above 100 percent of peak levels.

I take these numbers to be one measure (not the only measure) of how much we had been overvaluing our actual wealth, pre-crisis.

Here is the on-line version of the WSJ article, it does not reproduce all of the information in the paper edition, pp.A6-7.

The reality crashing down on us is that we can't afford all of the 'good' things that government has been providing.  We either need to consume less of these things or get a lot more productivity out of the people who produce them.

Which is the true point of the Wisconsin foofera.  And of course is why the Unionistas are so ticked.