1. Ch. 25 Section 2 State and Local Governments

2. State Government Revenues ► The largest source of revenue for state governments is intergovernmental revenue – the money that one level of government receives from another level. $.28 of every dollar ► Federal government gives states money for welfare, highways, hospitals, etc.

3. State Government Revenues (cont.) ► Sales tax is the second largest source of state revenue; $.21 of every dollar ► Tax on consumer purchases ► A percentage of the purchase price is added to arrive at the final price the consumer pays. ► The merchant turns over the taxes to a state government agency

4. State Government Revenues (cont.) ► 5 states do not have a sales tax; Alaska, Delaware, Montana, New Hampshire, and Oregon. ► Other states however range from 2.9 – 7% ► Internet purchases are not subject to sales tax which cut into state revenue.

5. State Government Revenues (cont.) ► 3 rd largest source of state revenue comes from contributions that states and state government workers make to their own retirement plans ► It is invested money until needed to pay for people’s retirement. ► $.17 of every dollar

6. State Government Revenues (cont.) ► State gets revenue from income tax as well. ► Some states charge a single rate to all taxpayers ► Some states tax a percentage of the federal income tax ► Seven states do not charge a income tax

7. Local Government Revenue ► Local governments # 1 source of revenue comes from intergovernmental revenue ► 36% of revenue comes from the federal government and state government

8. Local Government Revenue (cont.) ► Property tax is the 2 nd largest source of local revenue ► These are taxes that people pay on the real property or the personal property they own. ► Real property includes land and buildings ► Personal property includes portable objects (jewels, cars, art) ► Local governments anymore only tax real property

9. Local Government Revenue (cont.) ► Water and Utility companies are the 3 rd largest source of revenue; $.07 of every dollar ► In some places people are hit with a federal, state, and local income tax

10. State Expenditures ► Largest expenditure for the states are entitlement programs – these programs provide health, nutritional, or income payments to people who meet eligibility requirements ► Higher Education (colleges) is second on the list ► States subsidize or pay part of the costs for people’s college education. ► Without this, people would pay higher tuition and other fees.

11. Local Expenditures (cont.) ► 1/3 of all spending goes to local school districts and the operation of public schools. ► Elementary and Secondary education ► Building new schools; new additions; renovations ► Hiring new teachers ► Raises for veteran teachers

12. Local Expenditures (cont.) ► Police and fire protection ► Local community water service/contracting private firms ► Sewage/garbage disposal