1. CHAPTER TWELVE TAX AND SPENDING

2. Copyright © Houghton Mifflin Company. All rights reserved.12 | 2 The Principles of Finance Interdependence Diversity

3. Copyright © Houghton Mifflin Company. All rights reserved.12 | 3 Table 12.1 State and Local Taxes as a Percentage of Income

4. Copyright © Houghton Mifflin Company. All rights reserved.12 | 4 Revenues Criteria for Evaluating Taxes –Equity –Yield –Elasticity –Ease of Administration –Political Accountability –Acceptability

5. Copyright © Houghton Mifflin Company. All rights reserved.12 | 5 Revenues (continued) Major State and Local Taxes –Property Tax –Sales Tax –Income Tax –Miscellaneous Taxes

6. Copyright © Houghton Mifflin Company. All rights reserved.12 | 6 Figure 12.1 Distribution of Total State and Local Tax Revenue by Source, 2004

7. Copyright © Houghton Mifflin Company. All rights reserved.12 | 7 Table 12.2 Rating State and Local Taxes According to Six Criteria

8. Copyright © Houghton Mifflin Company. All rights reserved.12 | 8 Revenues (continued) User Fees Severance Tax Gambling: Lotteries and Casinos

9. Copyright © Houghton Mifflin Company. All rights reserved.12 | 9 The Political Economy of Taxation Spending Tax Revolt Fiscal Stress Limited Discretion

10. Copyright © Houghton Mifflin Company. All rights reserved.12 | 10 Figure 12.2 Total State and Local Spending by Area

11. Copyright © Houghton Mifflin Company. All rights reserved.12 | 11 Borrowing and Debt Estimating Revenues Rainy Day Funds Other Financial Management Practices –Long-term Borrowing –Limits on Borrowing

12. Copyright © Houghton Mifflin Company. All rights reserved.12 | 12 Where All the Money Goes: State and Local Spending Economic Development Education Policy Social Welfare and Health Care Policy