Author(s) :

Jayden Shin.

Volume/Issue :

Abstract :

This study examines the relationship between state tax revenue, public spending, and economic growth across U.S. states using a quantitative financial-health framework. State-level data were obtained from federal resources, including the U.S. Census Bureau’s Annual Survey of State Government Tax Collections and Annual Survey of State Government Finances, and state gross domestic product (GDP) data reported from the Bureau of Economic Analysis. Economic growth was measured as the annual percentage change in real state GDP. Employing a linear regression model, the association between fiscal variables and economic growth was assessed. The regression results showed that normalized tax revenue and public spending explained a small portion of variation in 2021 state GDP growth, but neither predictor was statistically significant. This suggests that the relationship between fiscal capacity, public investment, and short-term economic growth is weak and should be interpreted cautiously. Although the analysis does not establish causal relationships, the findings did not provide strong statistical support for the proposed hypothesis. This study provides an accessible exploratory state-level analysis using authoritative federal data and evaluates revenue and expenditure together as related indicators of fiscal capacity and economic performance.