8.6 Exercises

  1. State Tax Revenue (***): Download the following files: State Tax Collection (Comma Separated Value File) and State Tax Collection (U.S. Census PDF). The first file contains the tax revenue by state and year for various taxes in real and nominal terms. The PDF-file contains explanatory notes on the Excel file (although the content of the Excel file is relatively self-explanatory). Select a state of your choice (not Indiana) and answer the following questions:

    1. What are the three major tax revenue sources used by your state government in the most recent year? Hint: For each tax, calculate tax revenue as a share of total tax revenue. Select the three taxes with the largest shares.
    2. Use the three major tax revenue sources you identified in part (a) to answer the following questions: How rapidly have those taxes grown between 1994 and the most recent year? What may explain the trends you observe? Hint: Calculate the simple year-to-year growth rate for each. Plot a graph of the growth rates against time between 1994 and the most recent year.