State and Local Revenues

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© TAX ANALYSTS. Reprinted with permission.

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State and local revenues have been relatively stable over the last 30 years, growing from 13.5 percent of GDP in 1972 to 16.1 percent in 2002. However, as shown in the table, the composition of revenues has changed, with property taxes declining from 25.6 percent of revenues to only 16.6 percent. This decline was largely offset by state and local governments' heavier reliance on charges and the growth of miscellaneous revenue, which together increased from 16 percent to 25 percent of revenues over this period. The growth in miscellaneous revenue is largely due to growth in interest earnings from accounts and lottery revenues, while charges for higher education, hospitals, and sewage and waste disposal also increased.

Personal income taxes increased as a share of all revenues from 9 percent to 12 percent, after peaking at 13.7 percent in 2000 at the end of the 1990s boom. General and select sales taxes declined slightly from 22 to 18 percent of revenues.

These relatively stable patterns mask significant differences in revenue patterns across states. The decline in property tax revenues during the late 1970s followed passage of Proposition 13 in California and similar limitations in other states. California property tax revenues fell from 32 percent of general revenues in 1972 to 13 percent in 2002. In 2002, property taxes made up more than one-third of general revenues in New Hampshire and less than 7 percent of revenues in New Mexico and Alabama. Seven states had no personal income tax, while Massachusetts and Maryland raised more than one-fifth of their revenues from personal income taxes. Similarly four states did not levy general sales taxes in 2002, while another four states received more than 20 percent of revenues from this source. Utah, South Carolina, Mississippi and Alabama raised more than 20 percent of revenues from charges while Alaska raised more than one-third of its revenues from miscellaneous revenue sources and Washington, D.C., received about half of its general revenues from the federal government.

Note: This report is available in its entirety in the Portable Document Format (PDF).

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