Statestats: Waiting for the Other Shoe to Drop: October/November 2009

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Early Learning SpendingCommon sense tells us that when the economy goes south, tax collections move in the same direction. Here’s some not so common knowledge: Tax collections continue to fall after the end of a recession, and often end up falling further than the rest of the economy. Gross domestic product (GDP) and tax collection numbers around the previous and current recession show this clearly.

At this point in the current downturn, both shoes continue to hurl toward an unknown floor. The economy has been in decline longer than any time since the Great Depression, and tax collections have fallen past the previous low point reached after the 2001 recession. When the GDP does hit the ground and starts climbing back up, it
will be rightly celebrated. Unfortunately, state legislators will be left waiting for some
time afterward, listening for the second thud announcing that the drop in tax
collections has finally hit bottom, too.