State and Local Revenues

State and Local Backgrounders Homepage

State and local governments collected a combined $3.0 trillion of general revenues in 2016.

That amount includes intergovernmental transfers from the federal government but not transfers between state and local governments (which is why the total is less than the sum of the separate state and local totals). It also excludes revenues from government “business-like” activities such as water, gas, electricity, and transit utilities; government-run liquor stores; and government-administered insurance trusts (employee retirement and workers’ compensation systems).

What are the sources of revenue for state governments?

State governments collected $1.9 trillion of general revenues in 2016.

Taxes provided 48 percent of state general revenues in 2016:

  • 18 percent from individual income taxes
  • 2 percent from corporate income taxes
  • 15 percent from general sales and gross receipts taxes

  • 8 percent from selective sales taxes on purchases such as alcohol, cigarettes, and motor fuel

  • 5 percent from other taxes such as estate taxes and severance taxes

Charges, such as tuition paid to a state university, payments to a public hospital, and tolls on highways provided another 11 percent of state revenues in 2016. Miscellaneous sources, such as special assessments provided another 7 percent of state revenue.

Taxes, fees, and user charges are considered “own-source” revenue.

The final 33 percent of state revenue came from intergovernmental transfers; 98 percent came from the federal government and 2 percent came from local governments. 

What are the sources of revenue for local governments?

Local governments collected $1.6 trillion in general revenues in 2016.

Taxes provided 41 percent of local general revenues:

  • 30 percent from property taxes
  • 5 percent from general sales taxes
  • 2 percent from selective sales taxes on purchases such as alcohol, cigarettes, and motor fuel
  • 2 percent from individual income taxes
  • 2 percent from other taxes such as a city’s hotel tax

Charges, such as city revenue from sewerage and parking fees, provided 18 percent of local general revenues in 2016.  Another 5 percent of local own-source general revenue came from miscellaneous sources such as amounts received from the sale of property and interest from some investment securities.

The final 36 percent of local government general revenue came from intergovernmental transfers; 88 percent came from state governments (this total includes indirect federal funds) and 12 percent came directly from the federal government. 

How have the sources of revenue for state and local governments changed over time?

In inflation adjusted-dollars, combined state and local general revenue increased from $1.1 trillion in 1977 to $3.0 trillion in 2016. All major sources of revenue have grown in real dollars since 1977, with charges seeing the largest increase: from $123 billion in 1977 (in 2016 dollars) to $498 billion in 2016.

In 2016, transfers from the federal government provided 23 percent of combined state and local general revenues. The largest own-source funds came from sales taxes (combined general sales taxes and selective sales taxes were 19 percent of general revenue), property taxes (17 percent), charges (17 percent), and individual income taxes (13 percent).

Since 1977, property taxes as a share of combined state and local revenues have declined while charges have increased. The share coming from property taxes from 22 percent of total revenues in 1977 to 17 percent in 1985, but have been relatively stable since then. In contrast, revenues from charges have steadily increased from 11 percent in 1977 to 17 percent in 2016. Meanwhile, individual income taxes have also increased as a percentage of state and local revenue, providing 10 percent in 1977 and 13 percent in 2016. Revenue individual income taxes peaked at 14 percent in 2001.

Transfers from the federal government fluctuated considerably over the past three decades. They provided 22 percent of state and local revenues in 1977, dropped to a low of 16 percent in 1989, and returned to 22 percent in 2003. The American Recovery and Reinvestment Act of 2009 created a sharp uptick in transfers from the federal government between 2009 and 2011, peaking at 25 percent of state and local revenues in 2010 and 2011. However, the percentage of revenue from federal transfers has since fallen to 23 percent as economic stimulus spending receded.

Interactive data tools

State and Local Finance Initiative Data Query System

Further reading

State Tax and Economic Review
Lucy Dadayan (reports are updated quarterly)

Assessing Fiscal Capacities of States: A Representative Revenue System–Representative Expenditure System Approach, Fiscal Year 2012
Tracy Gordon, Richard C. Auxier, and John Iselin (2016)

Governing with Tight Budgets; Long Term Trends in State Finances
Norton Francis and Frank Sammartino (2015)

Note

All revenue data are from the US Census Bureau’s Annual Survey of State Government Tax Collections.  All dates in sections about revenue reference the fiscal year unless stated otherwise.