In economic development, attention is often paid to which areas of the country have low tax burdens and which have high tax burdens.  While not the only or even primary factor in driving business and economic development performance, tax burdens play an important role.  No area wants to be perceived as a high cost area and being considered low cost or even middle of the pack can help support economic development strategies.   In stable economic times, comparative tax burdens of states and regions seldom change as governments tend to follow the “business as usual” approach.  Thus, the ranking of states with regard to low vs. high tax burdens remains relatively constant.  However, all of this can change in a volatile economy.

The severe downturn in the national economic climate impacts households, businesses, and governments.  For government, loss of revenues associated with the downtown forces change.  This change can take the form of program and service reductions and eliminations, across the board spending reductions, tax increases, or some combination of all. The path taken in response to the economic downtown is in the hands of policymakers and the public and over time has the potential to re-shuffle the deck in terms of comparative tax burdens.  

Some states and regions will make the tough choices by identifying costs savings and program and service reductions and avoiding large tax increases.  Others will delay these tough choices by relying on tax increases or bailouts from federal grant and funding programs.  The net effect can move some areas from being high tax states to the middle of the pack or even being low tax burden states and vice-versa .  No doubt, making the tough choices will result in some pain as people benefit directly from the programs and services provided.  But in such tough economic times, a bit of pain now can make a more prosperous future.