Honors Theses

Date of Award

Spring 5-8-2026

Document Type

Undergraduate Thesis

Department

Economics

First Advisor

Garrett Scott

Second Advisor

Ryan Rholes

Third Advisor

Jonathan Winburn

Relational Format

Dissertation/Thesis

Abstract

State governments operate under strict fiscal constraints that limit their ability to respond to economic downturns through borrowing or monetary policy, making tax composition a key determinant of fiscal stability. This paper evaluates how variation in state tax revenue composition affects fiscal resilience during economic shocks, focusing on the Great Recession. While prior research shows that individual tax instruments differ in cyclicality, less is known about how overall tax structure shapes revenue performance during and after shocks. Using a panel dataset of U.S. states from 1988 to 2024, this study measures resilience through two outcomes: the magnitude of revenue decline and the time required to return to pre-shock levels. The empirical approach combines eventlevel regressions with a continuous difference-in-differences framework, exploiting cross-state variation in pre-shock tax composition. The analysis controls for institutional constraints and macroeconomic conditions. Results show little evidence that tax composition significantly affects the severity of revenue declines or recovery time. However, difference-in-differences results reveal a consistent, statistically significant relationship between property tax reliance and stronger post-shock revenue performance. These findings suggest that tax composition plays a limited role in mitigating immediate fiscal shocks but is important for shaping recovery dynamics, highlighting the relative stability of property-based taxation in constrained state fiscal systems.

Creative Commons License

Creative Commons Attribution 4.0 International License
This work is licensed under a Creative Commons Attribution 4.0 International License.

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