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    Why must state governments cut spending or increase taxes

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    As of 2009, many state governments were experiencing fiscal problems, and tax revenues were falling short of planned expenditures. What factors can influence state revenue collections and expenditures? Why must state governments cut spending or increase taxes when revenues fall short of expenditures? Give examples of the types of taxes used by state governments.

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    Some of the factors that can influence state's revenue collections include decline or boom in economic conditions which leads to lower or higher economic activity in the state and thus, affects revenues in areas like income tax, sales tax, property tax, etc. Similarly, the expenditures of a state are affected due to factors like new projects being implemented in the state in ...

    Solution Summary

    As of 2009, many state governments were experiencing fiscal problems, and tax revenues were falling short of planned expenditures. What factors can influence state revenue collections and expenditures? Why must state governments cut spending or increase taxes when revenues fall short of expenditures? Give examples of the types of taxes used by state governments.

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