The Real Cost of State Government

• In Event: Measurement and Method

Abstract

Government spending at the state level is typically reported as a dollar amount per resident. Revenue collected by the government is usually reported as an average or median tax rate representing the tax burden on residents and is frequently combined with local taxes. When comparing across states, these measures do not account for variations in state income levels or cost of living that may inflate or deflate costs of government operations and capital improvements relative to the national midline. This paper intends to create a holistic measure of the cost of government by state that accounts for the relative price, income, and tax base of each state. This is much the same as adjusting for inflation over time to create real GDP numbers. Adjusting for differences across states will allow for more accurate comparisons and understanding of a given state’s efficiency and effectiveness with its taxing and spending.

Author

• Michael Wales, Dartmouth College