Public Finance of the States

Florida’s Growth-Funded Model Florida has no personal income tax and sustains itself on a combination of sales taxes, property taxes, documentary stamp taxes on real estate transactions, and the economic windfall of being one of the country’s premier destinations for both tourism and retiree migration. The model has worked during periods of growth, and it has created fiscal vulnerabilities that become visible when growth slows. Revenue Structure Sales tax is the primary state revenue source at 6%, with a broad base that includes many services. Florida’s sales tax revenues are strongly correlated with tourism and consumer spending, making them sensitive to national economic conditions and travel patterns. ...

New York’s Fiscal Complexity New York is both a state and a city in a way that complicates most fiscal analysis. New York City’s budget is larger than most states. The fiscal fortunes of the state are deeply entangled with the fortunes of the financial industry concentrated in Manhattan. And the political economy of a state that must satisfy both the country’s densest urban core and large rural upstate regions produces a governing complexity with no real parallel. ...

California’s Singular Scale California’s economy is roughly the size of the United Kingdom’s. Its state government collects more revenue than most countries. Its fiscal decisions ripple through national markets for municipal bonds, healthcare, and education. Analyzing California’s public finance requires first setting aside the usual state-level frameworks—California operates at a scale where different dynamics apply. Revenue Structure and Volatility California’s defining fiscal characteristic is not its level of taxation but its structure of taxation—specifically, its extraordinary dependence on personal income taxes from high earners. ...

Texas’s Fiscal Model Texas is the most influential fiscal model in American state government—a large, fast-growing state that has maintained no personal income tax, attracted enormous business investment, and used its model as a competitive wedge against higher-tax states. Whether Texas’s approach represents a sustainable model of governance or a set of deferred costs and distributional choices that will eventually come due is one of the defining debates in state fiscal policy. ...

Ohio’s Fiscal Middle Ground Ohio is the Midwest’s great median case—large enough to matter, diverse enough to reflect the full range of regional tensions, and fiscally positioned neither at the crisis end (Illinois) nor the model end (Indiana). Understanding Ohio means understanding a state managing genuine post-industrial transition while navigating intense interstate tax competition and the fiscal complications of being a genuine political swing state. Revenue Structure Ohio’s revenue mix has shifted significantly over the past two decades. A major tax reform in 2005 phased out the tangible personal property tax and the corporate franchise tax, replacing them partly with a Commercial Activity Tax (a gross receipts tax applied to business revenues) and partly with reductions not fully replaced—a net tax cut that reduced the state’s fiscal capacity. ...

Illinois’s Fiscal Crisis in Context Illinois is the cautionary tale of American state finance—a large, productive economy with a world-class city at its center that has nonetheless accumulated one of the worst fiscal positions of any state in the country. Understanding Illinois requires separating the genuine structural problems from the political dysfunction that has prevented their resolution, and being honest about how much of the crisis was a choice rather than an accident. ...

Indiana’s Fiscal Identity Indiana has cultivated a reputation for conservative, stable fiscal management that is largely deserved. Among the Great Lakes states, it stands out for maintaining a balanced budget through economic cycles, keeping debt levels low, and resisting the pension obligations that have crippled Illinois to its west. Understanding how Indiana got here—and what it costs—requires looking at the history, the revenue structure, and the political economy that has sustained this approach across decades and governors of both parties. ...

The Fiscal Character of the West The West is America’s most fiscally diverse region—home to California’s singular economic scale, the extractive-industry booms and busts of the Mountain states, and the ideological experimentation of a region that has never had one dominant political tradition. The range runs from California’s large, activist state government to Wyoming’s minimalist reliance on mineral extraction revenues. The region divides into the Mountain states and the Pacific Coast, with meaningfully different fiscal profiles. ...

The Fiscal Character of the South The South is America’s fastest-growing region and, in many ways, the testing ground for the low-tax, low-service model of governance. The combination of population growth, relatively low public sector legacy costs, and aggressive interstate tax competition has produced a distinctive fiscal philosophy—and significant debate about whether it actually delivers better outcomes for residents. The region spans three Census divisions: the South Atlantic, East South Central, and West South Central, covering sixteen states with considerable internal variation. ...

The Fiscal Character of the Midwest The Midwest is America’s fiscal middle ground—neither the high-tax, high-service model of the Northeast nor the low-tax competition model of the South. But within that broad characterization lies enormous variation, from Illinois’s catastrophic pension crisis to Indiana’s reputation for conservative fiscal management to Minnesota’s Scandinavian-inflected public sector tradition. The Census Bureau divides the Midwest into the East North Central and West North Central divisions, though the more meaningful distinction for fiscal purposes is between the industrial Great Lakes states and the agricultural Plains states. ...