Intergovernmental Fiscal Relations in the US Sally Wallace, Dean - PowerPoint PPT Presentation

Intergovernmental Fiscal Relations in the US Sally Wallace, Dean AYSPS and University of Pretoria

Scope of government in the US • Federal republic • 50 States plus the District of Columbia • 89,004 local governments • 3,031 counties • 19,522 municipalities • 16,364 townships • 37,203 special districts • 12,884 independent school districts • Also--territories US Census

Legal structure • Substantial independence in the system stems from the U.S. Constitution: “The powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people.” • States, in turn, specify the rules of local government (sub-state)

Fiscal Structure • Revenue: • One major restriction for local governments—no tariffs! • States in turn may restrict their local governments • Expenditures: • Governed more by principles of correspondence than statute • Tensions do arise

Distribution of public budget Composition of State Tax Composition of Federal Composition of Local Tax Revenue Revenue Revenue 6% 2% 5% 1% Property Tax Property Tax Individual 2% Income 6% Tot Sales & Gr Tot Sales & Gr Corporate 18% Rec Tax Rec Tax Income 40% Individual 48% 52% Individual Social insurance 35% Income Tax Income Tax 76% Corp Net Corp Net Income Excise Income Tax Tax 9% Other

IGR to State and Locals Real Per Capita IGR $2,400 $2,200 $2,000 Axis Title $1,800 $1,600 $1,400 $1,200 $1,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Expenditures Composition of Federal Composition of Local Composition of State Expenditures Expenditures Expenditures Total Correct-Dir 1% 0% Total Correct-Dir Exp Exp Retirement 6% Total Educ-Direct 8% 3% 7% Total Educ-Direct Exp 1% 5% 16% Exp Health 7% Fin Admin 25% Education Fin Admin 9% Health & Hosp- Defense 19% Health & Hosp-Dir Exp 14% Dir Exp 21% 48% Welfare 28% Total Highways- Total Highways-Dir Exp 6% 8% Dir Exp 64% Interest Welf-Categ-Cash 4% Other Welf-Categ-Cash Assist Assist Sewerage-Direct Expend

Issues • Economic development and competition among states and local governments: • Sales tax rates – border bleeding • Property taxes – exemptions, holidays • Income tax – vast differences (NY vs. TX) • Proliferation of school districts • Increase in cityhood incorporations

Data • US Census: https://www.census.gov/data.html • Urban-Brookings Tax Policy Center State and Local Finance Query data base: https://slfdqs.taxpolicycenter.org/index.cfm • Swallace@gsu.edu