Tuesday, May 05, 2009

Where do states get most of their funds?

The answer might surprise you, as most would think that income, property and sales taxes are the primary sources of funding for the states.

However, this USA Today story indicates otherwise:

"In a historic first, Uncle Sam has supplanted sales, property and income taxes as the biggest source of revenue for state and local governments.

The shift shows how deeply the recession is cutting. Federal stimulus money aimed at reviving the economy and a sharp drop in tax collections have altered, at least temporarily, the traditional balance of how states, cities, counties and schools pay for their operations.

The sales tax had been the No. 1 source of state and local revenue since the mid-1970s, according to the Bureau of Economic Analysis. Before that, property taxes were the primary source. That changed in the first three months of 2009."

Getting funds from the feds means that states will not cut back when they need to. In fact, despite making cuts in the budget, Ohio is actually expanding some programs, by increasing eligibility to allow middle- and upper-middle-class families to participate.

What many fail to realize is that, eventually, people in the states will have to pay - in one way or another - for all those federal funds coming our way. Then what?

2 comments:

Tim Higgins said...

Maggie,

While the USA Today story is correct as far as it goes, and while you rightly point out the burden shift that must inevitably happen. States actually get most of their money from the same place the the federal government and cities get it, from taxpayers who can't seem to pull their snouts out of the trough of government largess. (no wonder the potential scare of swine flu)

They are so busy congratulating themselves on getting "free" money from somewhere else that they never take the time to realize that all government funding is a form of taxpayer self-consumption.

navyvet said...

It all comes out of our wallets....

Ouch....

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