1. UNIT #8 State and Local Government CHAPTER #21 State Government LESSON #4 Financing State Government

4. -States have two types of revenue: 1. Taxes 2. Non-taxes Page 1 Sources of Revenue UNIT #8 State and Local Government CHAPTER #21 State Government LESSON #4 Financing State Government Taxes -Sales Tax-a percentage of price of an item (i.e. $1.00 pen cost $1.05  5% sales tax) -Wisconsin has a 5% sales tax, Illinois has a 6.25% sales tax, sales tax varies per state -Sales tax is placed on general goods -Excise Tax-like the federal government, states also levy excise taxes -Generally they tax gasoline and cigarettes -Income Tax-states have both individual and corporate income tax

5. -These taxes may be progressive or proportional Note: Income tax makes up about 30% of state revenue and sales tax about 50% -Inheritance (Estate) Tax-like the federal government, states also levy estate taxes -Fees-are nothing more than a regressive tax -These fees are generally hunting, fishing, driver ’ s and marriage licenses as well as car registration Page 2 (continued) UNIT #8 State and Local Government CHAPTER #21 State Government LESSON #4 Financing State Government Non-Taxes -Borrowing-is simply states issuing bonds -Bonds are investments that are paid off, plus interest by a certain date

6. -States often sell bonds for major construction projects -State Lottery-is essentially legalized gambling to raise funds for state programs -Wisconsin uses lottery money to ease local property taxes -Federal Grants-return taxpayer money to the states in two forms -Categorical grants and block grants Page 3 (continued) UNIT #8 State and Local Government CHAPTER #21 State Government LESSON #4 Financing State Government The Budget Process -The state budget process is the same as the federal process, starting with the governor, onto the legislature, then back to the governor for final approval