State and local governments collected a combined $3.6 trillion of general revenues in fiscal year 2020.
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 $2.3 trillion of general revenues in 2020.
Taxes provided 46 percent of state general revenues in 2020, including:
- 17 percent from individual income taxes
- 15 percent from general sales taxes and gross receipts taxes
- 7 percent from selective sales taxes on purchases such as alcohol, motor fuel, and tobacco products
- 2 percent from corporate income taxes
- 5 percent from other taxes such as estate taxes, property 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 2020. Miscellaneous sources, such as special assessments, provided 7 percent of state general revenue.
Taxes, fees, and user charges are considered "own-source" revenue.
The final 37 percent of state general revenue came from intergovernmental transfers. In 2020, 36 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.)
Intergovernmental transfers were relatively high in 2020 because of federal spending in response to the COVID-19 pandemic. In 2019, federal transfers were 32 percent of state general revenue. In 2020 and 2021, Congress transferred a large amount of funds to state governments as part of the CARES Act, the Coronavirus Response and Relief Supplemental Appropriations Act (part of the December 2020 omnibus bill), and the American Rescue Plan. As such, federal transfers should remain a relatively large share of state general revenue for the next few years.
Local governments collected $1.9 trillion in general revenues in 2020.
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
- 3 percent from other taxes such as a locality's taxes on hotel bookings and restaurant meals
Charges, such as city revenue from sewerage and parking fees, when combined, provided 18 percent of local general revenues in 2020. Another 6 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 2020, 4 percent of local government general revenue came directly from the federal government (e.g., federal funds for local transportation projects) and 30 percent came from state governments (the numbers do not sum to the total share from intergovernmental transfers because of rounding). However, the state government transfer total includes indirect federal funds that are initially allocated to states. For example, the federal government sends K-12 education funds to state governments that then distribute the money to local governments. (All sources of local government general revenue do not sum to 100 percent because of rounding.)
The increase in federal transfers as a share of general revenue was not as large for local governments (34 percent in 2019) as state governments. This is most likely because much of the federal pandemic-related spending in 2020 went to Medicaid and other state-level programs. Federal pandemic spending in 2021 and beyond included more local support, and thus the federal share of local spending could increase when data are reported for those years.
In 2020 inflation adjusted-dollars, combined state and local general revenue increased from $1.2 trillion in 1977 to $3.6 trillion in 2020, or a 198 percent increase.
All major sources of revenue have grown in real dollars since 1977, with charges seeing the largest increase in percentage terms ($133 billion in 1977 to $581 billion in 2020, or a 337 percent increase) and transfers seeing the largest increase in total dollars ($267 billion in 1977 to $911 billion in 2020, or a 242 percent increase).
In 2020, transfers from the federal government provided 25 percent of combined state and local general revenues. The largest state and local general own-source funds came from property taxes (17 percent) and charges (16 percent), followed by individual income taxes and general sales taxes (both 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 16 percent in 2020. Meanwhile, individual income taxes have also increased as a percentage of state and local general revenue, providing 10 percent in 1977 and 12 percent in 2020.
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. As a result of the pandemic and the congressional response to it, federal transfers increased from 22 percent in 2019 to 25 percent in 2020. Further, because most federal aid was spent by state and local governments after 2020, federal transfers as a share of general revenue could increase further when data are reported for the proceeding years.
State Tax and Economic Review
Lucy Dadayan (reports are updated quarterly)
Surveying State Leaders on the State of State Taxes
Lucy Dadayan and Kim Rueben (2021)
More Than Fines and Fees: Incorporating Equity into City Revenue Strategies
Aravind Boddupalli, Tracy Gordon, and Lourdes German (2021)
State and Local Government Revenues and Racial Disparities
Aravind Boddupalli and Kim Rueben (2021)
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)