People tend to earn less and spend less when they retire. As the baby boom generation retires, the aging of the U.S. population will likely reduce state governments’ revenue per capita from income taxes and sales taxes significantly.

As the baby boom generation retires, the nation’s labor force participation rate is expected to decline. And since most people earn less and spend less during retirement, the aging of the U.S. population will likely reduce income and sales tax revenue per capita for state governments. Felix...