Federal Reserve flow of funds table F105 shows that the cost of state and local government to citizens has been steadily escalating over the last five years.

Taxes and other receipts of state and local government increased 2.7% in 2002, 5.5% in 2003, 6.2% in 2004, and 6.7% in 2005.

Most state and local government are not allowed to run a fiscal deficit and increases in expenses are passed on to citizens as higher taxes and other receipts.

The government, in calculating the Consumer Price Index, does not include the cost of increased taxes.

The rising cost of state and local government is an example of ‘hidden’ inflation. (See: Fiddling the CPI)

Federal Reserve flow of funds table F105 does not include the cost of retirement funds for government employees and therefore inflation of state and local government costs is probably greater.

(See: Consequences: Rising Home Values, Land Costs, and Pension Benefits.)