The Effect of TELs on State Revenue Volatility: Evidence from the American States

Source: Tucker Staley, Public Budgeting & Finance, Vol. 35 Issue 1, Spring 2015
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From the abstract:
Stable revenue flows in the American states are paramount for state policymakers in order to effectively and efficiently provide goods and services to their constituents. However, there has been very little empirical work which examines what political factors are correlated with volatility in state revenue streams. This work examines one wide‐spread fiscal limit, tax and expenditure limitations, which a majority of states began adopting after the tax revolt of 1978. Using panel data and time‐series cross‐sectional analysis, this work finds that states with more stringently binding tax and expenditure limitations — in addition to other political, demographic, economic, and geographic factors — are associated with greater levels of state revenue volatility. Looking at 48 states over 37 years (1969–2005), this relationship is both statistically and substantively significant.