A comparative analysis of variables affecting the tax revenue reliance of the 50 United States

This study describes and contrasts variations in the tax revenue reliance of the 50 states. In addition, the linkages between measures of several demographic, socioeconomic, and governmental characteristics and tax revenue reliance is examined using correlational and regressional analytic methods. The variables examined as to their possible effect on tax reliance are: population density, population growth, urbanization, income, education, race, federal aid, and state taxing and spending constraints. Region is the control measure utilized. Tax revenue reliance is found to be heaviest in those states located in the Midwest, with one-third of the 12 North Central states among the ten most heavily reliant states. The states which exhibit the least tax revenue reliance are found in the Western region; 46% of the 13 Western states are among the ten states which display the least tax revenue reliance. In addition to this strictly comparative survey, correlational analysis is used to further this reliance pattern examination. The level of federal aid a state receives consistently exhibited the most significant, and negative, linkage to tax revenue reliance. This measure proved to be significant for all states, with or without region as a control. Only for the urbanization measure can this consistent significance also be found. On the basis of the correlational analysis, regressional analysis was next utilized. Results of this regressional analysis indicate that once again federal aid is the most important determinant of tax reliance (r=-.74). This factor alone accounts for 55% of the total variance. The addition of the other variables only raises the explained variance to 60%. The governmental characteristic, state taxing and spending constraints, once again appeared to have little, if any, effect on the tax reliance pattern of the states. The major significance of this research is the demonstration that the federal government has within its reach the ability to greatly affect the fiscal planning and dependency in the states. Depending on the role desired by the policy makers and citizens of each state, the active vs. passive role of each state government in execution of its taxation policies will result in the particular reliance pattern.