• What are the major Federal and State limits on raising revenue?
• What are the four principles of sound taxation?
• What are the major tax and nontax sources of State and local revenue?
• How can we describe the State budget process?
Limits on Raising Revenue
States cannot raise revenue from:
• interstate and foreign commerce
• the Federal Government and its agencies
• any unfairly imposed or administered tax
• taxes that require confiscated property
• taxes imposed for other than public purposes
State constitutions limit the State and
local taxing powers.
• Most constitutions create tax exempt groups.
• State codes often set maximum rates for levies.
• Some taxes are prohibited.
The Principles of Sound Taxation
• Subjects contribute in proportion to their abilities.
• Taxes are certain and not arbitrary.
• Taxes are levied at a time and in a manner convenient to the contributor.
• Taxes should not take much more money from the people than government needs.
Sources of Revenue
See above picture on sources of Revenue
The Budget Process
• Each agency prepares estimates of its needs for the upcoming year.
• Estimates are reviewed by an executive budget agency.
• The revised estimates and supporting information are presented as the governor’s budget.
• The budget is considered part by part, funds are appropriated, and revenue measures passed by the legislature.
• The governor supervises the execution of the budget approved by the legislature.
• The execution of the budget is checked independently by auditors.