State and Local Financial Systems
Zach Ruark
POL112: Chapter12
Due Date: 5/3/2014
1. Two basic principles—interdependence and diversity—describe state and local financial systems as they have evolved. Explain the meaning of the terms and the nature of state and local fiscal systems in light of these principles. - Interdependence is the ability of each state to raise money through taxes, charges, and fees applied to people, services, and products within the jurisdiction of each level of government. Diversity refers to the many different sources of revenue each state and local finance system has. Each state and local government relies more on one source more than the others but the others still play a part in the finances.
2. Many criteria can be used to evaluate taxes. Explain three of the most commonly agreed upon criteria. Then use the sales tax, property tax, personal income tax, and lottery to illustrate how these criteria might apply in each instance. - Three of the most commonly agreed upon criteria use to evaluate taxes are equity, yield, and elasticity. With equity, citizens are taxed according to their ability to pay, meaning those with higher incomes will be taxed more than those with lower incomes. Yield taxes are based off efficiency meaning how much money the tax contributes the government coffers compared to the effort expended to administer and collect them. Elasticity is another criteria that is commonly agreed upon. Elasticity is related to yield and should be automatically responsive to changes in economic conditions and revenue devices should expand or contract their yields, as government needs change.
3. As federal funding to the states was reduced, states became creative in generating new funds via new sources of revenue. Describe some of the areas that states turned to for additional revenues. -
4. Where does all the money that state and local governments collect go? In other words, in what major areas and services do state and local
POL112: Chapter12
Due Date: 5/3/2014
1. Two basic principles—interdependence and diversity—describe state and local financial systems as they have evolved. Explain the meaning of the terms and the nature of state and local fiscal systems in light of these principles. - Interdependence is the ability of each state to raise money through taxes, charges, and fees applied to people, services, and products within the jurisdiction of each level of government. Diversity refers to the many different sources of revenue each state and local finance system has. Each state and local government relies more on one source more than the others but the others still play a part in the finances.
2. Many criteria can be used to evaluate taxes. Explain three of the most commonly agreed upon criteria. Then use the sales tax, property tax, personal income tax, and lottery to illustrate how these criteria might apply in each instance. - Three of the most commonly agreed upon criteria use to evaluate taxes are equity, yield, and elasticity. With equity, citizens are taxed according to their ability to pay, meaning those with higher incomes will be taxed more than those with lower incomes. Yield taxes are based off efficiency meaning how much money the tax contributes the government coffers compared to the effort expended to administer and collect them. Elasticity is another criteria that is commonly agreed upon. Elasticity is related to yield and should be automatically responsive to changes in economic conditions and revenue devices should expand or contract their yields, as government needs change.
3. As federal funding to the states was reduced, states became creative in generating new funds via new sources of revenue. Describe some of the areas that states turned to for additional revenues. -
4. Where does all the money that state and local governments collect go? In other words, in what major areas and services do state and local