UNIT #8

State and Local Government

CHAPTER #21

State Government

LESSON #4

Financing State Government

-States have two types of revenue:1. Taxes2. Non-taxes

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Sources of RevenueUNIT #8

State and Local Government

CHAPTER #21

State Government

LESSON #4

Financing State Government

Taxes-Sales Tax-a percentage of price of an item

(i.e. $1.00 pen cost $1.05 5% sales tax)-Wisconsin has a 5% sales tax, Illinois has a

6.25% sales tax, sales tax varies per state-Sales tax is placed on general goods-Excise Tax-like the federal government,

states also levy excise taxes-Generally they tax gasoline and cigarettes-Income Tax-states have both individual and

corporate income tax

-These taxes may be progressive or proportional

Note: Income tax makes up about 30% of state revenue and sales tax about 50%

-Inheritance (Estate) Tax-like the federal government, states also levy estate taxes

-Fees-are nothing more than a regressive tax-These fees are generally hunting, fishing,

driver’s and marriage licenses as well as car registration

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(continued)UNIT #8

State and Local Government

CHAPTER #21

State Government

LESSON #4

Financing State Government

Non-Taxes-Borrowing-is simply states issuing bonds-Bonds are investments that are paid off, plus

interest by a certain date

-States often sell bonds for major construction projects

-State Lottery-is essentially legalized gambling to raise funds for state programs

-Wisconsin uses lottery money to ease local property taxes

-Federal Grants-return taxpayer money to the states in two forms

-Categorical grants and block grants

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(continued)UNIT #8

State and Local Government

CHAPTER #21

State Government

LESSON #4

Financing State Government

The Budget Process-The state budget process is the same as the

federal process, starting with the governor, onto the legislature, then back to the governor for final approval