Economics
Federal Government Revenue Sources
Federal government revenue sources refer to the various ways in which the government generates income to fund its operations and programs. These sources typically include taxes (such as income, corporate, and payroll taxes), as well as other sources like tariffs, fees, and government investments. Diversifying revenue sources can help ensure stable funding for government activities.
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7 Key excerpts on "Federal Government Revenue Sources"
eBook - PDF- Frederic Bogui(Author)
- 2008(Publication Date)
- Routledge(Publisher)
In addition, the federal government also borrowed significant amounts of money as additional rev-enue during much of the 1980s and early 1990s to meet the continued budget defi-cits (Mikesell, 2003: 106–111). Federal Receipts by Sources in 2003 (Total Revenue: $1.8 trillion) Individual Income Taxes 45% Corporation Income Taxes 7% Social Insurance and Retirement 40% Excise Taxes 4% Other 4% Figure 3.1 Federal revenues by major sources in 2003. (Data source: Historical Budget Data, Congressional Budget Office. 2006.) Expenditures and Revenues in U.S. Governments 141 3.3.3 Revenues of State and Local Governments Table 3.5 shows revenue sources of state and local governments in fiscal year 2003. In comparison with the federal revenue system, state and local revenue structures present much more complicated pictures. Different states and local governments rely to a different extent on a variety of sources, and not all state and local govern-ments have the same mix. Unlike the income-tax dominance at the federal level, state revenues come from more diversified tax bases. A substantial share of state funds comes in the form of aid from other governments, mostly from the federal government. Other than that, the most dominant source of state revenue comes from taxes on goods and services, which provide about 25% of state revenues. All but five states (Delaware, New Hampshire, Montana, Oregon, and Alaska*) levy a general sales tax, which cover all or almost all sales of products (some states exempt groceries and/or other prod-ucts such as some medicines; Tax Policy Center, 2006c). In addition, all 50 states levy selective excise taxes for particular products such as motor fuel, cigarettes, and alcoholic beverages. Another major state revenue source is income taxes, but they are not levied in all states (Tax Policy Center, 2006a). Seven states—Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming—have no state individual income tax.
- William Duncombe(Author)
- 2018(Publication Date)
- WSPC(Publisher)
We begin this lecture with a brief description of the tax system in this country. The tax system — reflecting our complicated federalist system — is a complex web of different tax types used by different levels of government and revenue sharing between levels through intergovernmental grants. We will then turn to a brief discussion of revenue forecasting, which is a crucial part of the budgeting process. Finally, the bulk of the lecture will be devoted to a discussion of the criteria typically used to evaluate tax policies and government revenue sources.9.2Overview of the Tax System
As you are well aware, the US has a very diverse system of government, with the federal, state, and local governments each playing an important role in the provision of public goods and services. Although federal, state, and local governments spend similar amounts of the total public budget, they finance these expenditures with significantly different revenue sources. As illustrated in Table 9.1 :1.Federal revenue comes primarily from the personal and corporate income tax and the payroll tax used to finance the social security system (not included in individual income taxes in Table 9.1 ). Although the federal government does use various excise taxes and import duties, it does not employ either a general sales or property tax.2.State revenue comes from a variety of sources. The major source of tax revenue is sales and excise taxes which account for half of state tax revenue. Personal income taxes are the other major source of state tax revenue. State governments do not generally use a property tax. In addition, federal aid is an important source of revenue for state governments (24% of total revenue). For New York, we see that personal income tax is the most important state source of revenue representing 46% of state revenue and almost 60% of state taxes. Consumer taxes (sales taxes) are less important in New York with 17.3% of state revenue and 23% of state taxes. This highlights the diversity across states in their tax systems. For example, four states do not have a general sales tax and seven states do not have a personal income tax.Table 9.1. Percentage distribution of tax revenue for each level of government, FY 2010.a Note: Excludes social insurance contributions.Sources: US Bureau of Census, Governments and Budget of the US Government.Source: Thomas P. DiNapoli, “Citizens Guide 2009: A Pocket Reference to New York State’s Finances,” New York State Comptroller, pg. 2. https://www.osc.state.ny.us/finance/finreports/citizens_guide/citizensguide2009.pdf
eBook - ePubThe Economy in the 1980s
A Program for Growth Stability
- Michael J. Boskin(Author)
- 2019(Publication Date)
- Routledge(Publisher)
VIThe Role of Government in the Economy
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7JOHN B. SHOVENFederal Government Taxes and Tax ReformTax and nontax sources of revenue. The economic inefficiency of heavy taxation. The negative income tax. Income tax indexation or integration. The consumption tax.The United States enters the 1980s with a growing dissatisfaction over the equity and efficiency consequences of its tax system. We are in the midst of a “tax revolt” with calls for major across-the-board rate reductions, complete revamping of the basis of tax computation, and broader appeals for controls on the size of government. Clearly, the rapid and accelerating inflation the country has experienced in the past decade has prompted much of the furor regarding taxes, as has the decline in the rate of growth of real income. This chapter will examine trends in the relative importance of various federal tax instruments, will discuss their economic impacts, and will address several major tax reform alternatives.HISTORICAL TRENDS IN SOURCES OF GOVERNMENT REVENUEWhile it is natural to concentrate attention on the personal income tax, the fact is that this source provides only 45 percent of federal government revenue. This fraction has been relatively constant, as shown in Figure 1 , yet there have been major shifts in the relative importance of the other revenue sources. Social security’s “contributions” have risen dramatically; in 1953 these collections were one-fourth as large as the personal income tax, while today they are nearly three-fourths as big. The corporation income tax, on the other hand, has been steadily declining in importance, as shown in the figure. In the early 1950s it brought in over two and one-half times what social security did; by 1980 the social security system collected more than twice as much as the corporation income tax. Finally, indirect business taxes and nontax accruals (excise taxes, franchise fees, tariffs, deposits of earnings of the Federal Reserve System, etc.) have also significantly declined in relative importance. Given these trends, it seems appropriate that the social insurance system be given intensive examination, as is done in Chapter 10
eBook - ePub- Douglas Morgan, Kent S. Robinson, Dennis Strachota, James A. Hough(Authors)
- 2017(Publication Date)
- Routledge(Publisher)
Braybrooks, Ruiz, and Accetta 2011 , 5). A state level property tax for K-12 provides one means of equalizing school funding across a state. Inheritance and estate taxes provide a typically minor but politically sensitive source of revenue. Severance taxes on the extraction of petroleum, natural gas, and hard rock minerals, or on the harvest of timber, provide a substantial source of revenue for several states. State-owned lands and utility rights of way generate rental revenue.Unique to the state level, many state governments operate a lottery. Lottery profits provide a steady source of unencumbered nontax general revenue. Lottery dollars may be earmarked for a particular program or purpose, or used as annual revenues to pay off bonds. Local governments may receive a pass-through of lottery funds, but most lottery revenues remain at the state level.In contrast to the relatively limited contribution of federal intergovernmental funds at the local government level, federal transfers provide a major source of revenues at the state level for a broad array of programs. A listing of some of the major federal intergovernmental programs follows (Federal Funds Information for States [FFIS] 2011). Federal transfers for nutrition, social service, and child care programs are substantial. These transfer funds include: Women, Infants, and Children (WIC) and Supplemental Nutrition Assistance (SNAP); Temporary Assistance to Needy Families (TANF) annual block grant; Child Care and Development block grants; Child Welfare funds; Social Services Block Grants; Head Start early childhood learning funds; and Low-Income Home Energy Assistance funds. Federal funds support major health programs as well: Medicaid administration and Medicaid provider reimbursement for qualifying low-income citizens; Children’s Health Insurance Program; Mental Health Services block grant; and the Substance Abuse block grant. Many of these programs require a state percentage match for each federal dollar, or the maintenance of state spending effort. The unemployment insurance program in each state is jointly funded by federal and state payroll taxes but administered as a federal trust fund with payments to states. Federal dollars support programs for adult and youth worker training and for dislocated worker assistance. Federal funding provides critical support to state and local housing programs. The HOME investment partnership program, the Section 8 Rent Subsidy programs, the Community Development Block Grants (CDBG), the Community Services Block Grant, and housing for the elderly draw on federal funds. Federal Homeland Security funds support grants to states and to local governments for security, emergency response, and emergency preparedness. Department of Justice programs fund the Community Oriented Policing Services (COPS) and policing grants to local sheriff and police departments, the Violence Against Women program, and the Juvenile Accountability block grant. Federal transportation dollars provide substantial resources for airport, highway, and mass transit facility construction. Federal environmental funds support energy weatherization and clean drinking water programs.
No longer available |Learn moreState and Local Politics
Institutions and Reform
- Todd Donovan, Daniel Smith, Tracy Osborn, Christopher Mooney(Authors)
- 2020(Publication Date)
- Cengage Learning EMEA(Publisher)
Finally, much of what state and local governments spend comes from funds transferred from other, higher levels of gov-ernment, so a third way to express a government’s 56 Center on Budget and Policy Priorities, 2009, http://www.cbpp.org/cms/index.cfm?fa=view&id=2831. Copyright 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Chapter 10 364 revenue mix is to include all “own-source” revenues (taxes and other sources) plus transfers from other levels of government. The Mix of State Revenues The 50 states combined had nearly $1.6 trillion in annual revenue in 2011. To put that amount in perspective, the federal government collected about $1.6 trillion in annual revenue the same year (excluding Social Security). 57 Figure 10.4 illustrates the sources of all funds available to state govern-ments. Of the $1.65 trillion available, about $1.06 trillion was generated by states; the rest was fund-ing states received from the federal government. State-generated “own-source” revenue included $758 billion collected via state taxes, $181 billion in direct charges and fees collected by states in 2011, and about $120 billion from miscellaneous state revenue sources. Direct charges apply to users of state services and include college tuition, road tolls, park fees, and the like. As noted in Chapter 2, the federal government redistributes substantial funds back to the states each year—more than $594 billion in 2011, mostly to fund health and welfare expenses shared between the state and federal governments.
- Michael A. Pagano, R. Leonardi(Authors)
- 2007(Publication Date)
- Palgrave Macmillan(Publisher)
Potential tax bases and tax theory In the United States, with at least a modicum of fiscal autonomy, state and local governments can draw revenues from a variety of sources. States gen- erally collect money from income taxes, sales taxes, and several different fees and charges. Cities and counties collect revenue from sales taxes, prop- erty taxes, sometimes income taxes, enterprise charges, and an assortment of miscellaneous sources. 5 Nearly all subnational units receive some inter- governmental aid – states obtain it from the national government; cities and counties get it from both the state and national governments. Most cities, counties, and states have the ability to issue some types of debt. In the United States, there are significant differences between the theo- retical tax base and the base that is actually used. Although the Haig- Simmons definition of income is probably the most theoretically correct, in practice there are numerous institutional imperfections in the way that income is measured. 6 These imperfections reflect political solutions to such problems as how to count income-in-kind, value a stay-at-home spouse, ignore imputed rent on owner-occupied housing, and so forth. The income tax is primarily a central government and state tax, although in some regions of the United States, it is nearly ubiquitous at the city/township level. 7 Since the US central government is continually changing the tax code, measures of the amount of taxable income often change. As will be seen in Section III, these changes may affect subnational government revenues and lead to tax-assignment changes. The consumption tax base in the United States varies from state to state (and within some states, from jurisdiction to jurisdiction). For example, 112 The Dynamics of Federalism in National and Supranational Political Systems sometimes food and medical supplies are not taxed, some services are taxed, and some types of e-commerce are taxed.
eBook - ePub- Dele Babalola(Author)
- 2018(Publication Date)
- Palgrave Macmillan(Publisher)
The union might look more like a confederation than a federation. From the economic point of view, there is firstly a desire to ensure a uniform rate of customs and excise duties and a free flow of commodities among the units. There is secondly an attempt to place in the hands of the federal government a reliable source of revenue so that it can, without too much difficulty, meet the demands of preserving the territorial integrity of the federation and the internal constitutional order. Typically, the central governments in federal countries collect taxes and then distribute the proceeds to constituent governments according to some agreed formula. This is not different in Nigeria where Section 162(1) of the 1999 Constitution provides that the federal government deposits all centrally collected revenues into a general pool, called the Federation Account, to be shared vertically and horizontally. It is important to stress that states and local governments keep their internally generated revenues. In Austria and Germany, fiscal federalism is characterised overwhelmingly by revenue sharing, with constituent units having very limited independent own-source revenue (Anderson 2010, p. 55). Conversely, in Canada, Switzerland and the United States, constituent units control their tax revenues, with negligible or no revenue sharing (but some fiscal transfers), and in Australia, in addition to fiscal transfers, states share all of the federally levied VAT (Anderson 2010, p. 55). In Nigeria, the states’ sources of revenue are less lucrative compared with those of the federal government. They are also not adequate to match their constitutional responsibilities. Therefore, the states are left with no option but to depend on the centre in order to bridge their fiscal gap. Local governments generate revenue from liquor sales, birth and death registrations, environmental violations and fines, motor parking dues, and market stalls dues
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