This paper examines the general relationship between state tax policy and state spending policy and concludes that states that rely solely (or even primarily) on either an income tax or a retail sales tax to finance state spending are pursuing an ultimately unstable course. States that seek to...

Under current tax law, there can be considerable period-by-period divergence between a taxpayer's after-tax income and her desired or actual consumption. This divergence will cause the taxpayer to borrow. One can view such borrowing either as being incurred to fund consumption, or as being...