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Behind the numbers of New York State's tax burden

Richard Ravitch, chairman and founder of Ravitch Rice

Richard Ravitch, chairman and founder of Ravitch Rice & Co. LLC and former Lieutenant Governor of New York, speaks during an interview in New York. Budget cuts in Washington may put added pressure on state governments already strained by employee pensions and rising health care costs, according to a report by a group of former government officials led by former Federal Reserve Chairman Paul Volcker and Ravitch. (July 2, 2012) Credit: Bloomberg

The Task Force on the State Budget Crisis got a lot of things right about the nature and scale of the major fiscal challenges facing states and local governments through the country. In my column today, however, I argue that the task force got it wrong when it identified "eroding revenues" among those challenges.

In New York, one of the six major states on which the report focused, state taxes as a share of economic output rose to the highest level in more than a decade before the recession hit in 2007-08. And this was before Governor Paterson and the Legislature hiked taxes by billions of dollars in 2009.

I put together the following chart, using Census Bureau data for tax collections on a fiscal year basis with the Commerce Department's state Gross Domestic Product data for the calendar year preceding the March 31 end of the fiscal year.

NY taxes as a percentage of GDP

From 1977 to 2008, a period in which the state enacted some very significant reductions to its major tax rates, the overall trend was one of a very slight decrease in the tax burden as a share of state GDP. Whatever you call this, it couldn't be called "erosion." In fact, you might call it mild relief.