Revenue and Services among State and Local Governments

Introduction

Revenue and Services among State and Local Governments Icon To run a state government, the state must have money! Georgia’s government comes from four major categories:

Sales Taxes: Paid by consumers when they purchase items.
Federal Grants: The money the U.S. government gives to states to help fund items such as education and interstate highways.
Personal Income Taxes: Both states and the U.S. government tax the earnings of individual citizens and the money they earn from investments.
Property Taxes: Private homes, land, and business properties are taxed based on their value. This is a major source of funding for local governments.

Types of Taxes

Taxes in Georgia can be levied by the state as well as by counties and cities. A tax is a required payment to a government by a person or business. Taxes are the largest source of revenue for Georgia.

There are many different kinds of taxes:

- Income Tax: Personal and Corporate
- Sales Tax
- Property Tax

Income tax

Income tax is a tax on money earned by people or businesses.

Personal Income Tax:

Georgia’s largest single source of revenue.
Personal income tax is a graduated tax, meaning the tax rate rises or falls depending on a person’s income level.

Corporate Income Tax:

Usually a flat rate tax based on the money a company makes in Georgia.
Money made outside of the state is not taxable.

Sales Tax

Sales taxes may be collected by state and local governments.
A sales tax is a tax on goods and services.
Sales taxes are Georgia’s second largest revenue source.
Currently Georgia has a 4% state sales tax.
Local governments can also implement a sales tax with voters’ approval. With a combined state and local sales taxes, most purchases in Georgia have a tax of 7 to 8%.

Property Tax

A property tax is a tax placed on property such as land, homes, cars, boats, and business inventory.
Property taxes are calculated on a percentage of the value of the property.

Non-Taxed Revenue

The largest non-tax revenue source for the state of Georgia is the state lottery.
Other sources include entry fees to state parks, and license fees for driving and hunting.
Local governments get non-tax revenue through fees for services such as water and sewer.

Spending

Georgia’s constitution mandates the state to maintain a balanced budget; this means the state cannot spend more money than it brings in.
Keeping a balanced budget keeps the state out of debt and fiscally strong.
The governor submits a budget to the state legislature, this budget is then modified by legislators, and signed by the governor—who can veto items in the budget.
How money in Georgia is spent depends on how it is collected. A general fund holds many funds from which state services are financed.
State services funded by the general fund include the public school system, maintaining roads throughout the state, and operating state parks.
Some money is targeted for a specific purpose.
Lottery revenues must be spent on special programs such HOPE scholarships and pre-kindergarten programs.

Review

Review what you've learned by completing the activity below.

Think About This

Taxes allow a state and local government to function and provide key services to their individuals. Income taxes allow the state to maintain a general fund and provide key items such as education and roads. Property taxes help fund the projects of local governments needed within their community. The state and local governments add a sales tax onto all items purchased as well. These taxes allow citizens to receive protection from police and fire departments and education from teachers as their salaries are provided by the general fund established by the state government. The state focuses on financial responsibility by maintaining a balanced budget and not allowing the state to carry any financial debt.

IMAGES CREATED BY GAVS