ABSTRACT
The round of tax reductions that then occurred was followed by two severe recessions in the early 1980s, causing a 13 percent drop in state-local tax revenue as a proportion of personal income by 1982. Because the fiscal position of most states was severely depressed, they responded in 1983 with a broad array of tax increases, which, along with the national economic recovery that began in November 1982, brought about a dramatic improvement in the health of state finances. The course of state fiscal policy in the 1990s depends on developments in four areas—the health of the economy, federal budget and tax policy, taxpayer willingness to pay higher taxes, and service demands. The chapter examines part of National Conference of State Legislature's Fiscal Federalism Project, which has been funded by a grant from the Ford Foundation. State fiscal conditions are both a determinant and a result of state fiscal policies.
