The Great Recession of 2008 was such a low point the U.S. economy that the state of Georgia is still being impacted today. It can even be felt with students who say they feel the need to ‘pinch the penny’ every purchase they make.
Atlanta taxes an extra 1 percent on goods purchased within city limits. This means that around Georgia State campus students are paying 8 percent total, according to the Department of Revenue.
Sophomore Soo Kim said she remembers when the recession hit as if it happened yesterday. She also said the effects are just as fresh.
“I’m a little older, so I remember. Even though the recession is supposed to have ended, it seems that we’re all still struggling,” Kim said. “I wonder when this will all be behind us.”
Six years later Georgia State Department of Economics Professor David Sjoquist and Tulane University Economics Professor James Alm measured how the revenues of different state governments have fared after the 2008 crash, according to an article in Georgia State’s State and Local Government Review.
In the study, Sjoquist and Alm measured economic recovery which is a measure of how much a state’s economy produces goods and services (output). The results state that Georgia produced 95 percent of its 2007 pre-recession output.
However, the other states that were growing even more slowly by this measure were seeing higher rates of revenue recovery, according to the report.
Revenue Recovery is measured by how much a state is collecting back from its economic output via taxes, fees and other charges that states collect, according to Pew Trusts’ website.
This revenue then pays for public expenses in the state, according to a university release about the study.
Sjoquist and Alm found that when compared to all other states whose economic recovery was even slower than Georgia’s, the state’s revenue recovery still somehow emerged as third lowest in the nation.
The state is still recouping less money for public services than it did in 2007 and this is despite the economy improving overall, according to the study.
The study also revealed that the culprit for this surprising imbalance could be Georgia’s reliance on sales tax as a primary means to generate state revenue.
“The correlation between recovery ratio and the share of own source revenue from sales taxes is -0.38. That is, states that have a greater reliance on sales taxes had slower recovery,” Sjouist said in the release. “Georgia has the 37th highest relative reliance on sales taxes, suggesting that sales tax reliance is an important factor in explaining Georgia’s lack of revenue recovery.”
Georgia collects four percent sales tax on purchased goods and each county determines its own rate, according to the Georgia Department of Revenue.
See graphic above for sales tax by county in metro Atlanta.
Rising junior Steven Smith, who was previously aware of the study, said there is concern to be drawn from the study’s findings and how it will economically impact students who are looking for jobs after graduation.
“We’re paying a lot for goods even though the economy is not fully recovered from the recession [sic],” he said. “What happens after graduation if the economy still hasn’t picked up and sales tax around here is still high?”
Smith also said he wants to know where the results are appearing if individuals from Georgia are being heavily taxed.
“My question is why are we being taxed so much without having the income to back it up? And that goes for adults in the whole state, not just students,” he said.
Although Georgia is one of the states that relies more on sales tax and experienced smaller recoveries, the dependency might not be the singular death knell for a robust economic recovery, according the study’s results,
Sjoquist states within the report that the pattern of recovery is mixed.
“There is no single explanation for recovery that applies to all states beyond growth in the states economy,” he said.
Sjoquist and Alm’s report suggested a re-evalulation of state tax policy, given the evident positive correlation between a reliance on sales tax and weak revenue recovery. This argued that the recovery may be larger if a state adopted discretionary tax changes.
However, beyond the question of sales tax dependency it could be that revenue hasn’t recovered because the nation hasn’t recovered.
States could ultimately be at the mercy of national recovery in the post-Great Recession economy despite policy change efforts, according to the report.
“At this point, any short term recovery in state budgets must largely await national economic policy,” the report states.
