A government’s revenue system is the entire means by which a government acquires funding. States rely on a broad range of revenue sources to fund government. On average, states generate more than one-third of their revenues from personal income taxes and another one-third from general sales taxes. The remaining revenues are split between excise taxes (on gasoline, cigarettes and alcohol); corporate income and franchise taxes; and taxes on business licenses, utilities, insurance premiums, severance, property and several other sources. That being said, the general character of a state or state and local revenue system is more important than the nature of any single one of its components.
The relative importance of the major revenue sources for state and local governments changed since 1971. Property taxes declined in importance, and their share was picked up mostly by state individual income taxes, charges and miscellaneous revenues. Since state revenue systems have developed gradually and tax policy is used to address multiple objectives, state revenue systems are likely to include inconsistencies.
Each year NCSL conducts a survey at the close of legislative sessions and, based on information provided by legislative fiscal directors, reports the significant revenue changes in State Tax Actions.