Economic Analysis of Effects of Business Cycles on the Economy of Cities: The Effects of Inflation on State and Local Government Finances, 1972-1982

摘要

This paper analyzes the effects of inflation on State and local government expenditures, revenues, capital outlays, and borrowing for 1972-82. Despite accelerated inflation, both States and local jurisdictions increased their aggregate real expenditures on current operations and transfer payments. Local governments' actual expenditure growth only barely exceeded the amount that could have been accounted for by inflation; whereas, State expenditures were about 13 percent greater than the volume required merely to offset inflation. The States also were able to capture the potential revenue increments attributable to inflation and some additional revenues as well. Local governments and counties managed to gain incremental revenues in excess of those attributable to inflation. Municipalities' actual revenues at best just kept pace with the inflation - induced potential. Moreover, property tax limitations enacted in many jurisdictions during the late 1970's meant that a significant portion of the 1977 taxable property base was not legally available to be taxed in 1982. Inflation did contribute to a slowdown in State and local governments' capital purchases. Tables and an explanation of the study's methodology are provided.