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33 Cards in this Set
- Front
- Back
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Identify several changes occurring in revenue and tax policy in the United States since the early part of the 20th century that have had a major impact on state and local governments.
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- Government spending has grown much faster than its income (GDP
- Wars, threats of war, and depression have affected revenue and tax policy |
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Since the turn of the 20th century, the majority of LOCAL Government income came from
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PROPERTY tax
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Since the turn of the 20th century, the majority of STATE Government Income came from
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SALES tax (S=S)
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3 restrictions in state taxing power
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US Constitution
State Constitution Can't tax property of federal government |
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US Constitution restrictions state taxing powers:
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No taxes on imports & Exports
No taxes on interstate commerce (trade between states) No taxes that deny rights given by the 14th amendment |
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State Constitution restrictions on State taxing powers:
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No personal income tax
(Florida is 1 of six states that don’t allow personal income tax) |
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Federal Government restrictions on State Taxes:
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Government cannot tax federal government (Mcculloch v Maryland) 1816
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Progressive Tax
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The more money you make, the more taxes you pay
Larger the salary, larger the responsibility (preferred) |
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Example of Progressive Tax
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Graduated personal income tax
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Regressive Tax
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Paid by those with less ability to pay
(Property, sales, sin taxes, lottery) |
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Examples of Regressive tax
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Property
sales sin taxes/lottery |
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Property Tax
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Tax on land and the construction on it (ad valorem)
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Property Tax benefits
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Difficult to “hide” from IRS
Sales and Income taxes will encourage people to move away |
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Property Tax problems
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Creates greater divide between rich and poor
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Sales tax benefits
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Can be generated by mobile population (visitors)
Insures that low-income people who benefit from state services share in cost of their provision |
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Excise Tax
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"The Sin Tax"
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Personal & Corporate income tax
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Has graduated scale
Can create competition among states for residences |
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4 things about Taxes Lottery and Gambling Winnings
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Generates Only 5% of revenue on average
Administration costs are very high (around 50%) Very regressive and can lead to state spending more money in social services for low-income people who participate in these taxed activities |
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User Fees
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toll roads
parking garages permits Housing etc.. |
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Factors that account for variations in social revenue policies among states
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personal wealth of citizens
education level of citizens |
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Good tests of a taxing system
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Physical adequacy
Flexibility – should be sensitive to economic changes Diversity – Should not rely too heavily on one form of tax “diversify” |
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Principles of taxation
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Equality – everyone pays the same (ex Poll tax) (not common)
Benefit – as taxes rise, service quality should too (parks, streets recs) |
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What percent of a person's earnings will be taken by the government?
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40%
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Tax Revolt/Backlash (6)
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Self- Interest – not paying for things we are not benefiting from directly
High taxes Government Wastes $ Fairness – not fair to pay for other people’s problems Alienation – just don’t like government |
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Cutback strategies (5)
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No change – across the board cuts, hiring freezes
Hierarchy of community needs – cut least important services Privatization – contracting out services (police/fire etc…) Reduction of capital spending (buildings, hospitals, state vehicles) Reduction in labor |
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State Budgetary Process
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Preparation – (one year)
Execution – (one year) Audit – (one-half year) (Overlap) |
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Benton research:
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(G) aid acts as a catalyst to (g) spending
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Types of Budgets
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Executive – governor responsible for budget
Legislative – Legislation responsible Board or Commission |
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Characteristics of budgetary process (Wildavsky) (4)
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Incrementalisim –changes in small increments (up)
Political - $$ Fragmentation – many people put their hands on the budget Non-Programmatic – is there a ROI? |
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General Obligation bond
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Full faith & credit – always tied to tax increase
Most used, least desireable |
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Revenue Bond
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Repaid with the revenue that is made from loan (dorms, stadiums)
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Mortgage Bond
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Collateral, “pawn”
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Industrial Bond
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Used in economically depressed places, brings industry in to stimulate development (over ½ of municipal debt)
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