NCPA - National Center for Policy Analysis

Newly Rich States Can't Resist Spending

May 28, 1999

Awash in revenues, a number of states are racing to spend taxpayers' money -- rather than returning it to its source. That is the conclusion of a new Cato Institute report by Dean Stansel and Stephen Moore.

  • Between 1990 and 1997, spending increased by more than 30 percent in Mississippi, Oregon, Arkansas, West Virginia, Texas, Missouri and New Hampshire.
  • If states had restricted increases in spending and tax collection to the rate of inflation and population growth between 1992 and 1998, the state tax burden would be $75.2 billion lower today, the researchers report.
  • In an era of almost no inflation, state spending grew by 4.5 percent in 1996, by 5 percent in 1997, and nearly 6 percent in 1998.
  • Vermont, Florida, Nevada and South Dakota raised their spending by 10 percent or more in 1998.

Yet during the past four years, only $1 out of every $3 in unexpected surpluses has been returned to taxpayers.

Surprisingly, state spending since 1994 has grown 50 percent more than federal spending. And combined state and local taxes as a percentage of median family income have almost doubled over the past four decades.

Over the present decade, real federal aid to states and localities increased by almost half -- and is now about 40 percent higher than in 1980.

Source: Dean Stansel and Stephen Moore, "The State Spending Spree of the 1990s," Policy Analysis No. 343, May 13, 1999, Cato Institute, 1000 Massachusetts Avenue, N.W., Washington D.C. 20001, (202) 842-0200; Macroscope, "Hey, Big Spenders," Investor's Business Daily, May 28, 1999.

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