The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

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Abstract

State and local revenues have been relatively stable over the last 30 years, growing from 13.5 percent of GDP in 1972 to 16.3 percent in 2005. 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. Much of this decline occurred in the 1970s.

State and local revenues have been relatively stable over the last 30 years, growing from 13.5 percent of GDP in 1972 to 16.3 percent in 2005. 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. Much of this decline occurred in the 1970s. The decline was largely offset by state and local governments' heavier reliance on charges and miscellaneous revenue, which together increased from 16 percent to 24 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 14 percent in 2001 at the end of the 1990s boom. General and select sales taxes declined slightly from 22 percent to 19 percent of revenues.

These relatively stable patterns mask significant differences in revenue 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 2005. In 2005 property taxes made up more than one-third of general revenues in New Hampshire and less than 7 percent of revenues in Alabama and New Mexico. Seven states had no personal income tax, while Maryland and Oregon raised more than one-fifth of their revenues from personal income taxes. Similarly, four states did not levy general sales taxes in 2005, while five states received more than 20 percent of revenues from this source. Alabama, Iowa, South Carolina, and Utah raised more than 20 percent of revenues from charges, while Alaska raised more than one-third of its revenues from miscellaneous revenue sources. Mississippi, Washington, D.C., and Wyoming received more than one-third of their revenues from the federal government.

(This publication is also available with figures in PDF format.)

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

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