State and Local Revenues

State and Local Backgrounders Homepage

State and local governments collected a combined $2.9 trillion of general revenues in year 2015.

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 roughly $1.9 trillion of general revenues in 2015.

Taxes provided 49 percent of state general revenues in 2015:

  • 23 percent from sales and gross receipts taxes (including both taxes on general purchases and selective taxes on purchases such as alcohol, cigarettes, and motor fuel)
  • 18 percent from individual income taxes
  • 3 percent from corporate income taxes
  • 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 2015. 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 of which came from the federal government. 

What are the sources of revenue for local governments?

Local governments collected $1.6 trillion in general revenues in 2015.

Taxes provided 41 percent of local general revenues:

  • 30 percent from property taxes
  • 7 percent from sales taxes
  • 2 percent from individual income taxes
  • 2 percent from other taxes such as a city’s hotel tax

Charges and other fees, such as sewerage and parking meter fees collected by a city, provided 18 percent of local general revenues in 2015.  Another 5 percent of local own-source general revenue came from miscellaneous sources.

The final 36 percent of local government general revenue came in transfers from other levels of government—32 percent from states (including indirect federal funds) and 4 percent directly from the federal government. 

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

In inflation adjusted-dollars, state and local governments collected a combined $1.1 trillion of general revenues in 1977, and thus have increased more than 150 percent since then. All major sources of revenue have grown in real dollars since 1977, with charges seeing the largest increase: from $122 billion in 1977 (in 2015 dollars) to $479 billion in 2015.

In 2015, transfers from the federal government provided 23 percent of combined state and local general revenues. The largest own-source funds came from sales taxes (19 percent of general revenue), property taxes (17 percent), charges (16 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 fell nearly 5 percentage points from 22 percent of total revenues in 1977, with most of the drop occurring between 1977 and 1982. In contrast, revenues from charges are up 5 percentage points over that period, from 11 percent in 1977. Meanwhile, individual income taxes remained relatively stable as a percentage of state and local revenue, providing 10 percent in 1977 versus 13 percent in 2015, and peaking 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, hitting a peak of 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 has receded.

Further reading

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.