Inequality Affecting State Budgets and Economic Growth, Reports Say – Others Disagree

A new report by the credit-rating agency Standard and Poor’s (S&P) finds that rising income inequality is slowing revenue growth in states across the nation. For the state of Missouri, tax revenue growth averaged about 9% annually from 1950 to 1979, but by 2009 revenue growth had slipped to 2.04%. The report – Income Inequality Weighs on State Tax Revenues – also indicates there is more volatility in state tax collections, which has complicated the work of state budget planners.

Economists use the term income inequality to refer to the gap in income between the very affluent and those of middle and lower incomes.

The S&P report on state tax revenues is a follow up to another study by the agency that concludes income inequality is hampering U.S. economic growth. The study – How Increasing Income Inequality is Dampening U.S. Economic Growth, and Possible Ways to Change the Tide – sees increasing the education received by Americans as one way to reduce inequality and spur economic growth.

Other commentators, however, are questioning the value of a college education when the cost is so high and students end up with staggering levels of debt. Others, however, argue that college is still a worthwhile investment, as discussed in this New York Times article. Meanwhile, the Manhattan Institute is questioning some of the data and reasoning used by S&P.

 

Posted: September 19, 2014

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