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US State and Local Government Revenue History



Currently, state governments in the United States raise about 8.5 percent of GDP in revenue and local governments raise about 10 percent of GDP in revenue.

A Century of State and Local Taxes

State taxes have exploded in the 20th century.

Chart 3.41: State and Local Revenue in 20th Century

At the start of the 20th century, state government revenue stood at about 0.8 percent of GDP. It expanded briskly in the 1920s, reaching 2.3 percent of GDP in 1929. State revenue exploded to 4.2 percent of GDP in 1933 and then increased to 5.4 percent of GDP in 1939 before falling back to a low of 3.1 percent in 1944 during World War II.

At the start of the 20th century, local government revenue stood at about 3.8 percent of GDP. It expanded briskly in the 1920s, breaching 6 percent of GDP in 1927. Local revenue exploded to 9.2 percent of GDP in 1933 before declining to a low of 3.0 percent in 1944 in the middle of World War II.

In the post World War II era, state and local revenue increased steadily for decades, reaching a peak at the end of the 1990s. Since 2000 state and local revenues have ended their long increase as a percent of GDP, and have fluctuated wildly due to gains and losses in their employee pension funds due to major bear markets in 2000-1 and 2008-9.

Recent State and Local Revenue

State and local revenue has increased slightly in recent years, subject to fluctuations in returns on employee pension funds.

Chart 3.42: Recent State and Local Revenue

In 1985 state government revenue stood at 8.0 percent of GDP and local government revenue stood at 6.1 percent. Two decades later, in 2007, state revenue had grown to 10.8 percent and local revenue had grown more modestly to 7.14 percent. But the two financial crises of the early 21st century knocked a temporary hole in state revenue, dropping it to 6.9 percent of GDP in 2002 after the 2000-01 bear market, and to 4.4 percent of GDP in 2009 after the Crash of 2008. Local revenue was not much affected by the market downturns. Local revenue started the 21st century at 6.7 percent of GDP in 2001 and reached 7.5 percent of GDP in 2011. State revenue in 2015 is expected to be 9.2 percent GDP and local revenue is expected to be 6.45 percent GDP.


Trends in State Revenue by Type

In the last century states have diversified their sources of revenue.

Chart 3.43: Trends in state revenue

Back at the beginning of the 20th century, most state revenue came from ad-valorem taxes like property and sales taxes. About 15 percent of tax revenue came from fees and charges. By the end of the 1920s the share of ad-valorem and fees had been reduced by the introduction of income taxes and social insurance taxes.

After the interruption of World War II, revenue in 1950 divided up as 58% for ad-valorem taxes, 8 percent fees and charges, 7% business and other revenue, 11.4% income taxes, and 16 percent social insurance taxes (including employee pension contributions).

Chart Key:
- ad-valorem taxes
- fees and charges
- business and other revenue
- income tax
- social insurance taxes

For the next half century, ad-valorem taxes continued to decline, and income and social insurance taxes expanded. In 2000 ad-valorem taxes stood at 32% of total revenue, fees and charges at 9%, business and other revenue at 9%, incomes taxes at 23% of total, and social insurance taxes (including pension contributions and income) at 26%.

Chart 3.44: Recent State Revenue Trends

In recent years, the share of ad-valorem taxes have mildly declined and the share of social insurance taxes (including pension fund contributions and income) have increased from 20% to about 24% of revenue. The stock market downturns in 2000-01 and 2008-09 caused major losses for state employee pension funds. In 2009 the pension fund loss was greater than all other social insurance tax revenue.

Trends in Local Revenue by Type

In the 20th century local governments reduced reliance on ad-valorem taxes.

Chart 3.45: Trends in Local Revenue

Prior to World War II, revenue from ad-valorem taxes yielded about 80% of total revenue, with fees and charges and business revenue yielding the remaining 20%.

In the post World War II period, local revenue breakdown in 1950 was ad-valorem at 68%, fees and charges at 14%, business and other revenue (e.g., liquor stores, utilities, and transit) at 16%, income taxes at 0.6% and social insurance (including employee pensions) at 1.6%.

By 2000 ad-valorem taxes had shrunk to 47% of total revenue, fees and charges had increased to 21%, business and other revenue had increased to 23%, incomes taxes to 3.1%, and social insurance (including pension contributions and income) to 6.6%.

Chart 3.46: Recent Trends in Local Revenue

In recent decades the share of revenue from different sources has remained fairly constant. In 2005 ad-valorem taxes like property taxes and sales taxes, stood at 49%, fees and charges at 22%, business and other revenue at 20%, income tax at 3% and social insurance at 5.5%. In 2015 ad-valorem taxes are expected to be 49.6% of revenue, fees and charges 23.5% revenue, business and other revenue at 20% revenue, and social insurance taxes at 3.7% revenue.

The notch that appears between 1991 and 1992 reflects recategorization of data with the new detailed data series from the US Census Bureau that start in 1992. The spike shown for 2009 reflects losses experienced by local employee pension plans in the Crash of 2008.

State-by-State Comparison of State and Local Revenue

States shuffle the deck from decade to decade

Chart 3.51: State and Local Revenue Comparison in 1960


The bubble chart above shows total state and local revenue in 1960 for each state in dollars per capita compared against the Gross State Product (GSP) in dollars per capita. The chart shows a correlation between state and local revenue and GSP. Notable outliers are Delaware and Nevada on the low revenue side.

Chart 3.52: State and Local Revenue Comparison in 1985


The bubble chart above shows total state and local revenue in 1985 for each state in dollars per capita compared against the Gross State Product (GSP) in dollars per capita. The states are all in a bunch, except Alaska which is in the middle of its North Slope oil boom.

Chart 3.53: State and Local Revenue Comparison in 2013


The bubble chart above shows total state and local revenue in 2013 for each state in dollars per capita compared against the Gross State Product (GSP) in dollars per capita. Alaska has the highest GDP per capita and the highest revenue, but Wyoming and New York and North Dakota are showing form.

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Revenue Data Sources

Revenue data is from official government sources.

Gross Domestic Product data comes from US Bureau of Economic Analysis and measuringworth.com.

Detailed table of revenue data sources here.

Federal revenue data begins in 1792.

State and local revenue data begins in 1890.

State and local revenue data for individual states begins in 1957.

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Next Data Update

> Federal Budget FY16

> data update schedule.

Data Sources for 2017:

GDP, GO: GDP, GO Sources
Federal: Fed. Budget: Hist. Tables 2.1, 2.4, 2.5, 7.1
State and Local: State and Local Gov. Finances
'Guesstimated' by projecting the latest change in reported revenue forward to future years

> data sources for other years
> data update schedule.

The Feds Borrow More Than The "Deficit"

People naturally assume that the annual Deficit is the total that the Federal government borrows each year. Actually this is not so. The Deficit is simply the difference between Federal Outlays and Federal Receipts. Usually, the Feds borrow a lot more than the official Deficit.

Like below, in $ billion:

YearGross
Debt
Debt
Increase
Federal
Deficit
Other
Borrow
2000562924-236259
20057905551318232
20101352916531294359
20111476412351300-64
20121605112871087200
201316719669680-11
2014177951075485590
201518120326438-113
2016195371417587830

We have provided the difference between the Debt increase and the Deficit for each year under "Other Borrowings" on the Spending Details page. To Recap:

Other Borrowings = (Increase in Federal Debt) - (Official Deficit)

Tax links

us dataus chartdeficit/gdptaxes/gdpdebt/gdpus gdpus real gdpbreakdownfederalstatelocal201520162017californianew yorktexas

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