Local Revenue Diversification: User Charges, Sales Taxes, and Income Taxes

David L. Sjoquist and Rayna Stoycheva

in The Oxford Handbook of State and Local Government Finance

Published in print March 2012 | ISBN: 9780199765362
Published online September 2012 | | DOI:

Series: Oxford Handbooks

 Local Revenue Diversification: User Charges, Sales Taxes, and Income Taxes

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From broad-based taxes on sales and income and employer payrolls, to fees and charges on school lunches, medical equipment, parking, etc., few topics take us into more aspects of public economics than the study of local revenue diversification. This article provides a thorough review of this topic, bringing to the discussion new data as well as some new evidence on the measurement of the degree of revenue diversity among the states. The article begins with a set of measures as to the growth of the level and degree of revenue diversification by type of government, and, from there, it addresses the questions of “why diversify,” where diversification works well, and where, in contrast, it has led to unintended negative outcomes. It presents several reasons that justify local revenue diversification, beginning with the fundamental proposition that, just as is true for nations and states, different localities have different revenue-raising capacities.

Keywords: revenue diversification; user charges; sales taxes; income taxes; revenue-raising capacity; broad-based taxes

Article.  13461 words. 

Subjects: Economics ; Public Economics ; Financial Markets

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