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Local and State Government Finance
In the United States, Local and State governments fund many government projects and services such as roads, socials services, firefighters, roads, and education (Schiller 23). This essay explores the various sources of revenue for Local and State governments, why and who gets the money, as well as the entities, individuals, and groups that influence what levels and how the funds are dispersed. While the federal government accounts for the local and State government funding, there exist several ways in which these governments finance themselves.
Taxation is the primary source of revenue for these governments, as there exist various types of taxes at both State and local levels (Schiller 24). Taxes are levied on the percentage of a given amount of income or purchases received. Some of the most common types of taxes present in these governments include income tax, sales tax, corporate tax, property tax, and gas tax. Other owned Local and State government-owned sources of revenue include fines and penalties, rates, license fees, and miscellaneous fees (Schiller 25). License fees incur where the government authorities are involved in conferring permission or certain privileges. Fines and penalties are the charges imposed on individuals or groups of individuals as a punishment for contracting the law. Lastly, miscellaneous fees involve the local and States payment to defray recurring costs of the services undertaken by these governments, mainly in the public interest.
Although the composition of tax revenue has somewhat changed, the share of state and local revenues from taxation has remained steady at approximately forty percent since 1977 (Schiller 26). According to Schiller, the contribution of property taxes to general revenues reduced from thirty-four percent in 1977 to thirty percent in 1979, twenty-seven percent in 2000 (27). Currently, a property tax to general revenue in local and State governments stands at thirty percent, while sales taxes are at seven percent between the two governments.
Navigation of the complex crosscurrents in the State and local governments finances an essential skill for State Governors, Mayors, and other local administrators. State and local government budgets are hugely influenced by political involvement, social, economic, and legal factors. Entities that influence money dispersion includes the States, counties, Municipalities (Cities and towns), school districts as well as special districts. Nevertheless, the United States Constitution grants State government absolute power in sharing State and local level revenues since these local governments are part of specific States’ constitutional provisions or acts of the state legislatures (Swanson & Charles 673). Therefore, the State government has the power to regulate local government spending, fund sharing, and fund dispersion.
Conclusively, there are several sources of homemade revenues for State and local governments ranging from tax provisions to license fees, miscellaneous fees, fines, and penalties. The local and State governments use the revenue obtained from these sources to finance state and local functions such as roads, schools, firefighting, education, and other social services. Additionally, the funds are shared or dispersed among the state government with local functions such as counties, municipalities, school districts, and special districts. Mainly, the money dispersion decision is made by the respective State governors as state governments have authority over the local governments. Other factors that influence government money dispersion between the local and State governments include political involvement, economic, social, and legal factors.
References
Schiller, T. (2010). Riding the revenue roller coaster: Recent trends in state government finance. Business Review (Federal Reserve Bank of Philadelphia), 23.
Swanson, Jeffrey, and Charles Barrilleaux. “State Government Preemption of Local Government Decisions Through the State Courts.” Urban Affairs Review 56.2 (2020): 671-697.