Handbook of State and Local Government Finance

December 1, 1966

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Research Publication No. 7

Foreword
The expenditures and taxes of state and local governments play a major role in American life. State-local governments employed about 7.8 million individuals in 1966, compared with Federal employment (excluding the armed forces) of 2.6 million. State-local purchases of goods and services now exceed those of the Federal government for non-defense purposes. Expenditures of states and localities have been growing more rapidly than population, their 1965 per capita expenditure of $387 was 90 percent larger than in 1955, and their 1965 taxes of $266 per capita were more than 87 percent above the 1955 level.

Money figures, of course, cannot reveal the “flesh and blood” effects. Services provided by state and local governments influence profoundly everyone’s daily life. And our future — as individuals, as families, as communities, and as a nation — will depend in part upon what states and localities do in financing schools, streets, and other governmental functions. The necessary taxes, how-, ever, reduce our ability to buy many private things we need and want. State-local taxes also influence the economic outlook of the communities where we work and live.

Pressures to increase state-local expenditures remain powerful. Why? And why, despite increases in tax rates and the imposition of new taxes which together have increased total yields by about 120 percent in 10 years, does a shortage of money seem to plague states and localities? What are the facts, the problems, the alternatives? Such questions involve complex issues and cannot be answered easily. We can, however, survey the general situation today and discuss some factors which bear upon the choices ahead.

This Handbook was prepared as part of the broad research and educational program of the Tax Foundation. Unlike other Foundation studies, however, this rests, not so much upon new research conducted for the specific project as upon my own work extending over many years, supplemented by aid from the Foundation’s staff. I have sought to maintain the Foundation’s standards of objectivity, but at some points there are evaluations and judgments, both implicit and explicit. These are my responsibility. They do not necessarily represent the views of the Foundation staff, or membership.

The Tax Foundation is a private, non -profit organization founded in 1937 to engage in non-partisan research and public education on the fiscal and management aspects of government. Its purpose is to aid in the development of more efficient and economical government. It serves as a national information agency for individuals and organizations concerned with government fiscal problems.


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