Assignment: Draft ideas about government revenues acquired through the system of taxation. This should be about three to five paragraphs at the most. The format is not a formal paper, but an opportunity for you to apply and discuss ideas.
Material and content I would like re-written:
Government revenue is income received from taxes and other sources to pay for government expenditures . The U.S. government has collected $1.58 trillion in fiscal year 2024. Over half of federal revenue comes from individual income taxes, 9 percent from corporate income taxes, and another 30 percent from payroll taxes that fund social insurance programs. The rest comes from a mix of sources.
Policymakers can directly increase revenues by increasing tax rates, reducing tax breaks, expanding the tax base, improving enforcement, and levying new taxes. They can indirectly increase revenues through policies that increase economic activity, income, and wealth.
Property Tax
Property taxes are a major source of funds for many governmental units. Ask these
questions when reviewing property tax revenue estimates:
Does the estimated revenue increase at least as much as the rate of inflation?
Does the estimated revenue appear to reflect increased revenues from any new
development, such as housing, office or commercial construction?
Abatements – not good for revenue
Abatements are complete or partial waivers of taxes or fees that businesses would
otherwise owe to a jurisdiction. Public officials in communities attempting to slow the erosion
of their tax bases often offer businesses subsidies and tax abatements in order to encourage them to locate or remain in the jurisdiction. Most of these schemes take the form of “tax holidays” or a reduction in the assessed value of the property below the fair market value for a given number of years.
Although they may sound like good ideas, tax abatements should be discouraged. When
tax abatements reduce the amount of revenue to the jurisdiction, a higher proportion of the
property tax burden is forced onto individuals. In addition, evidence is growing that while firms
will take abatements when offered, the business tax structure is not a very important
consideration in the development plans of businesses. Of greater concern to businesses are the availability of a skilled labor force, access to raw material and consumer markets, and the quality of the transportation network. These are conditions that the jurisdiction should work to improve rather than offering tax giveaways.
Delinquent Taxes
As a general rule, local governments responsible for collecting property taxes should achieve at least 95 percent of the current levy. That is, no more than 5 percent of the current levy should become delinquent. Thus, a jurisdiction that collects less than 95 percent should be criticized as inefficient. If a jurisdiction is collecting $25 million from property taxes, an increase of only 2 percent would add another
$500,000 to available revenue. The collection rate can be improved by a “get tough” policy.
Such a policy would include publishing the names of delinquents in the local newspaper, phone
calls, and, if all else fails and the amount of back taxes warrant it, the property can be sold at a tax sale to pay the delinquent tax bill.
User Fees
User fees are a significant source of locally generated income for local governments.
Typical user fees are public parking garage charges, water and sewer service charges,
recreational charges, and use charges for public buildings and facilities. The fees should cover
the full cost of providing the service or operating the facility. If user fee revenues are not
keeping pace with inflation, you should ask if the fees are covering costs.
Interest on Investments
Many localities possess significant cash assets that earn interest. Because expenditures are
spaced evenly throughout the year, jurisdictions should invest the idle resources, striving to
achieve the maximum return at the minimum risk, while allowing for ready access to invested
funds. Short-term U.S. Treasury Notes and Money Market Funds are two common investments.
One approach is to pool the idle balances of several local governments into larger amounts of
investable funds. This can increase revenues by increasing the rate of return on investments.
Transparency
Governments can be transparent about tax spending by implementing and publishing a medium-term revenue strategy so that all citizens can be informed about how their tax dollars are being used. Each sunday, someone at my church gives a quick 30 second “thank you” detailing something our tithes pay for (ex: nursery facilities, fire alarms and sprinkler systems, mission trips, a new roof, sound equipment, etc.) This goes a long way in making the congregation feel good about the money we are giving the church. Instead of the usual “please be sure to tithe and give back to the church” there is detail around what the money is spent on. Now, I’m not saying being transparent about tax spending will make people volunteer to pay more taxes, but it might decrease tax evasion.
