State and Local Revenues
State and local governments collected a combined $2.6 trillion of general revenues in fiscal year 2012.
This amount excludes duplicative intergovernmental transfers, as when states (and to a lesser extent localities) collect revenues but then send funds to other levels of government that then spend the dollars on specific programs.
To present a full picture of where states and localities get their revenues, the discussion below includes these intergovernmental transfers. As a result, total amounts presented below sum to more than $2.6 trillion.
All revenue data are from the U.S. Census Bureau’s Government Finance Statistics. In addition to states, the Census recognizes five types of local government: counties, municipalities, townships, special districts (e.g. a water and sewer authority), and school districts.
General revenues refer to revenues collected in what the U.S. Census Bureau terms the general government sector. This sector excludes water, gas, electricity, and transit utilities as well as government-run liquor stores and insurance trusts (employee retirement and workers’ compensation systems).
State governments collected roughly $1.63 trillion of general revenues in 2012. Nearly one-third of this amount (32.7 percent) came from intergovernmental transfers, the overwhelming majority of which (96 percent) came from the federal government (figure 1).
The remaining two-thirds of general revenues are considered “own-source” revenues because they come from states own taxes, fees, and user charges.
Overall, taxes provided half (49 percent) of state general revenues in 2012.
State taxes as a percentage of general revenues included:
- 23.2 percent from sales and gross receipts taxes (including both taxes on general purchases and selective taxes on purchases such as alcohol, cigarettes, and motor fuel)
- 17.2 percent from individual income taxes
- 2.6 percent from corporate income taxes
- 6.0 percent from other taxes (e.g., estate taxes and severance taxes)
Charges and fees, such as tuition paid to a state university, payments to a public hospital, or tolls on a highway, provided another 18.2 percent of state revenues in 2012.
Local governments collected $1.46 trillion in general revenues in 2012. Fully 37 percent of that came in transfers from other levels of government—32 percent from states (including indirect federal funds) and 5 percent directly from the federal government. Local government own-source revenues provided the remaining 63 percent of general revenues (figure 2).
Overall, taxes provided about 40.4 percent of local general revenues.
Local taxes as a percentage of general revenue included:
- 29.7 percent from property taxes
- 6.7 percent from sales taxes
- 1.8 percent from individual income taxes
- 2.1 percent from other taxes (e.g., a city’s hotel tax)
Charges and other fees, such as sewerage and parking meter fees collected by a city, provided another 22.5 percent of local general revenues in 2012.
In fiscal year 2012, transfers from the federal government provided 22.5 percent of combined state and local general revenues. The remaining funds came from own-source revenues, including charges and miscellaneous revenues (24.1 percent), sales taxes (18.3 percent), property taxes (17.2 percent), and individual income taxes (11.8 percent).
Since 1977, property taxes as a share of combined state and local revenues have declined while charges and miscellaneous revenues have increased (figure 3). The share coming from property taxes fell nearly 5 percentage points from 21.9 percent of total revenues in 1977 to 17.2 percent in 2012. In contrast, charges and miscellaneous revenues rose about 7 percentage points over that period from 16.4 percent to 24.1 percent. Meanwhile, individual income taxes remained relatively stable as a percentage of state and local revenue, providing 10.3 percent in 1977 versus 11.8 percent in 2012, and peaking at 13.7 percent in 2001.
Transfers from the federal government fluctuated considerably over the past three decades. They provided 21.9 percent of state and local revenues in 1977, dropped to a low of 16.0 percent in 1989, and rose to a then-high 22.4 percent in 2004. The American Recovery Reinvestment Act of 2009 created a sharp uptick in transfers from the federal government between 2009 and 2011, hitting a peak of 24.9 percent of state and local revenues in 2010. But the percentage of revenue from federal transfers dropped sharply in 2012 as stimulus spending receded.