Why IGR Is Not a True Measure of a State’s Economy

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Using internally generated revenue (IGR) alone to judge the size of a state’s economy is misleading. IGR shows how much revenue a state or local government collects from sources such as PAYE, levies, licences, rents, fines and agency fees. It does not measure all goods and services produced within the state. IGR figures can also be affected by collection efficiency, tax policy, reporting methods and political pressure to present impressive growth. A state may have a large informal economy but low IGR because collection is weak. Another may raise IGR through stricter tax enforcement without a comparable expansion in economic activity. A clearer assessment should consider state GDP and gross value added, alongside jobs, household income, productivity, investment, business formation, industrial output, poverty levels and human development indicators. IGR is useful for assessing fiscal capacity, but it should not be presented as proof of overall economic size or progress.

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