State and Local Revenues
State and local governments collected a combined $3.3 trillion of general revenues in fiscal year 2018.
That amount includes intergovernmental transfers from the federal government but not transfers between state and local governments (which is why the combined total is less than the sum of the separate state and local totals listed below).
It also excludes revenues from government's "business-like" activities such as water, gas, electricity, and transit utilities; government-run liquor stores; and government-administered insurance trusts such as employee retirement, unemployment compensation, and workers’ compensation systems.
- What are the sources of revenue for state governments?
- What are the sources of revenue for local governments?
- How have the sources of revenue for state and local governments changed over time?
- Further reading
State governments collected $2.1 trillion of general revenues in 2018.
Taxes provided 49 percent of state general revenues in 2018, including:
- 19 percent from individual income taxes
- 2 percent from corporate income taxes
- 15 percent from general sales taxes and gross receipts taxes
- 8 percent from selective sales taxes on purchases such as alcohol, motor fuel, and tobacco products
- 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, when combined, provided another 11 percent of state general revenues in 2018. Miscellaneous sources, such as special assessments, provided another 7 percent of state general revenue.
Taxes, fees, and user charges are considered "own-source" revenue.
The final 33 percent of state general revenue came from intergovernmental transfers. In 2018, 32 percent of state general revenue came from the federal government (e.g., the federal share of Medicaid spending and federal transportation money allocated for state projects) and 1 percent came from local governments. (Sources of state general revenue do not sum to 100 percent because of rounding.)
Local governments collected $1.8 trillion in general revenues in 2018.
Taxes provided 42 percent of local general revenues, including:
- 30 percent from property taxes
- 5 percent from general sales taxes and gross receipts taxes
- 2 percent from selective sales taxes on purchases such as alcohol, motor fuel, and tobacco products
- 2 percent from individual income taxes
- 2 percent from other taxes such as a city’s hotel tax and taxes on restaurant meals
Charges, such as city revenue from sewerage and parking fees, when combined, provided 18 percent of local general revenues in 2018. Another 5 percent of local general revenue came from miscellaneous sources such as amounts received from the sale of property and interest from some investment securities.
The final 35 percent of local government general revenue came from intergovernmental transfers. In 2018, 4 percent of local government general revenue came directly from the federal government (e.g., federal funds for local transportation projects) and 31 percent came from state governments. However, the state government total includes indirect federal funds that are initially allocate to states. For example, the federal government sends K-12 education funds to state governments that then distribute the money to local governments. (Sources of local government general revenue do not sum to 100 percent because of rounding.)
In inflation adjusted-dollars, combined state and local general revenue increased from $1.2 trillion in 1977 to $3.3 trillion in 2018, or a 178 percent increase. All major sources of revenue have grown in real dollars since 1977, with charges seeing the largest increase in percentage terms ($130 billion in 1977 to $548 billion in 2018, or a 324 percent increase) and transfers seeing the largest increase in total dollars ($259 billion in 1977 to $740 billion in 2018, or a 186 percent increase).
In 2018, transfers from the federal government provided 22 percent of combined state and local general revenues. The largest state and local general own-source funds came from charges and property taxes (both 17 percent), followed by individual income taxes (13 percent), general sales taxes (12 percent), and selective sales taxes (6 percent).
Since 1977, property taxes as a share of combined state and local general revenues have declined while charges have increased. The share coming from property taxes fell from 22 percent of general revenue in 1977 to 17 percent in 1985, but since then property taxes as a share of general revenue have been relatively stable. In contrast, revenues from charges steadily increased from 11 percent of general revenue in 1977 to 17 percent in 2018. Meanwhile, individual income taxes have also increased as a percentage of state and local general revenue, providing 10 percent in 1977 and 13 percent in 2018.
Transfers from the federal government have fluctuated considerably over the past three decades. They provided 22 percent of state and local general 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, before falling back to 22 percent in 2012.
Given the decline in state and local tax revenue resulting from the COVID-19 pandemic, and the large amount of federal transfers approved by Congress, particularly as part of the American Rescue Plan, these numbers will probably look radically different for fiscal years 2020 and 2021. However, it will be a few years until Census publishes that data.
State Tax and Economic Review
Lucy Dadayan (reports are updated quarterly)
State and Local Government Revenues and Racial Disparities
Aravind Boddupalli and Kim Rueben (2021)
California’s State and Local Revenue System
Richard C. Auxier, Tracy Gordon, and Kim Rueben (2020)
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)