State and Local Government: Taxation Policies

Introduction

In trade and commerce, the term revenue, which is also known as turnover, is normally used to mean the income that a firm accrues from conventional business transactions, normally taking the form of the selling of goods and/ or service to the client. In the same vein, government revenue refers to the income that the government receives from the process of managing state resources ( herein, it should be kept to mind that politics and governance, although basically concerned with the acquisition and consolidation of power, yet this power is the authority to implement the allocation of values and national resources). At the same time, these revenues are used to run the state’s day-to-day activities. Therefore, revenues and expenditures are different parts of the same coin. The government acquires resources to run through myriads of means (Lindholm, 212).

Main body

The mainstay of government revenue is taxation. Taxation as a form of revenue differs from other sources in the sense that its exaction is always mandatory, unlike other forms of payments where the payer may consider whether or not to pay, in the sense that the payee can resort to buying or not buying a certain product. The public pays the taxes without having procured any services or having bought any products.

There are different types of taxation. The most common form of taxation is the income tax, which is always exacted in the course of the public earning their salaries. In most cases, this procedure is always highly systematized in that on one being employed, the tax rate payable is calculated against the salary to be received, so that the tax deductions are done straight away on the salary being received. However, not everyone is taxed who is working. Those exempted from taxation are normally those in the informal sectors and those with minimum wages and salaries. Since the beginning of the financial year 2008, the US federal government has already earned 1,565 billion dollars, while the local government has already raked in 30.41 billion dollars through income tax (Aronson, John and James, 122).

There is also the social tax that is normally exacted on both native and nonnative residents for staying in a certain country, and hence, using the state’s social amenities and resources. From the start of the financial year 2008, the federal government has already accrued 908.1 billion dollars while the local government, 8.31 billion dollars. The state in totality has 111.1 dollars from the exacting of social tax.

The excise tax is always exacted by the government officials on export goods and services. Since the beginning of the financial year 2008, the US federal government has already accrued 68.8 billion dollars, while the local government, 495.1 billion dollars. On the other end, the customs tax is exacted on all import goods and services.

The government also exacts taxes on businesses that exist within the state. Informal businesses that are very small scale are at times exempted from taxation. From January 2008 to April 2008, the US federal government has exacted a total of 118.9 billion dollars while the local government, on the other hand, has 156.7 billion dollars (Mc Connell and Bruce, 567).

Apart from taxation, the government may take to the selling of its goods and services. Government monopolies and parastatals always exact fees for services rendered to the public. These accruals are in turn remitted into the government’s pool of revenue.

Countries that have run short of funds may resort to borrowing, mostly, foreign funds. Developing economies obtain financial support from their international trading partners, the two Bretton Woods Institutions (the World Bank and the International Monetary Fund), and regional blocks such as the European Union.

These same developing economies because of their small revenue basket, rely on the imposition of tariffs from the international trade to earn revenue, albeit this is never sufficient.

All states earn a form of domestic revenue from the judiciary through the exactions of court fines, penalties, and the payment of bonds.

Conclusion

Government expenditure refers to those expenses that the government incurs when managing the state. Some of these forms of expenditures include the repair and management of infrastructure; the payment of the civil service and all government employees, including the defense; the running and management of the state corporations; and the procurement of resources by the government.

Apart from the above conventional types of expenditure, almost all governments incur a special form of expense in the form of transfer payments. These include payments that the government makes which are not accompanied by the services rendered or goods provided by the payee. Examples of transfer payments include bursaries, pensions, and gratuities.

Bibliography

Aronson Richardson, John Hilley and James Maxwell. The financing of state and local governments. US: Brookings Institution Press, 1986.

Lindholm Richard. Analysis of government spending: public finance and fiscal policies. US: Pitman, 1990.

Mc Connel Campbell and Bruce Stanley. The principles, problems and policies of macroeconomics. US: Mc Graw Hill, 2005.