Cost of Government Day (COGD)
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State and Local Spending

In 2007, the average American will work 45.7 days to pay for state and local spending.  The full day increase in state and local spending burden from 44.5 days in 2006 represents the third increase in three years.  While state and local spending declined in 2003 and 2004, the increases since 2005 have spiked spending as a percentage of national income back to the recession levels of 2002.  State and local spending as a percentage of national income has increased 6 percent since 2000.  Since its low in 1998, state and local spending as a percentage of income is up 7.8 percent. 

The upward trend in state and local spending as a percentage of national income over the last three years is expected to continue in future years.  Early this decade states faced a significant slowdown in tax revenues due to the bursting of the stock market bubble and the subsequent recession.  The federal aid provided to states as part of the 2003 federal tax cut served to encourage new spending on the state and local level.  State tax revenues have recovered since 2004 and soaring tax revenues are fueling rapid spending growth.  However, even with looming unfunded pension and health care liabilities, states are failing to reform their entitlement programs.  On the contrary, many states used their 2007 sessions to discuss expanding health care programs and imposing heath insurance mandates.  These actions will increase the cost of government as a percentage of national income severely in coming years.            

State & Local Spending Continues its Upward Trend

State Tax Increases

Given that most states increased taxes to continue spending during the economic slowdown, ATR has also compiled a list of state tax increases by state for the past seven years. ATR made two adjustments to the data from the National Governor’s Association. First, we compounded the tax increases to reflect tax increases made in 2002 which have to be paid in successive years. Second, we adjusted each state’s increases by population to have a better comparison across states.

The index shows that New Jersey continues to overwhelmingly lead all states in terms of tax increases.  Raising taxes by well over $22 billion, the Garden State government increased taxes on each resident by over $2,601 since fiscal year 2002.  On a per capita basis, residents in Connecticut, Nevada, Rhode Island and New York also face tax increases over $1000 over this period. 

Six states, led by Idaho and Florida, reduced taxes from fiscal year 2002 through fiscal year 2008. Following Idaho and Florida, Hawaii, Arizona, Iowa and Louisiana respectively reduced taxes.

State Tax Increases Compounded Per Capita FY 2002-FY 2008

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