B RUNORI C HAPTER 1 I MPORTANCE OF T AXATION F EDERAL, L OCAL, AND S TATE

C HALLENGES General Trends Shift in economy from manufacturing to services and intellectual property Electronic commerce Business cycle swings Devolution of responsibility to state level Politics of anti-taxation Concern with economic development

C ONTINUING I MPORTANCE OF S TATE T AXATION Just as citizens will continue to demand services, state governments – as they have throughout history – will need to find the revenue to pay for these programs. In the past, state political leaders have proved resourceful in financing government services despite the often-significant political and economic challenges to state tax systems. Thus, the question is not whether taxes will raise the necessary money, but from which groups the funds will be collected.

A L OOK AT S TATE T AX P OLICY Benchmarks Fair Efficient Stable Accountable Interstate competition and taxation Political pitfalls Electoral Legislative

P RESSURE ON S TATE T AXES Sales and use Personal income Corporate income Other state taxes Other sources of revenue

F EDERAL T AXES Income Tax Personal Corporate Payroll taxes Excise Taxes Fuel Tobacco and alcohol Communication and transportation Tax Policy Center

S TATE R EVENUE S OURCES Intergovernmental transfers Income taxes Personal Corporate Sales taxes General sales and gross receipts Selective sales tax Charges and miscellaneous receipts Other taxes Tax Policy Center

L OCAL Inter-governmental transfers Property taxes Charges and miscellaneous receipts Sales and gross receipts tax Individual income Other taxes Tax Policy Center