Local government revenues have not remained aligned with modern economic realities. GFOA and a group of partners contend that the time is now for rethinking revenue systems.
Local government revenues are crucial for funding public services like schools, roads, first responders and so many others that citizens depend on. Doing this with efficiency and fairness has always been a challenge, but today local revenue structures are largely based on assumptions that no longer hold true as digitization, globalization, demography, political changes, and other trends continue to shift the landscape. Meanwhile, fairness is becoming an increasingly important concern for public finance and the ways in which revenues are raised.
The Rethinking Revenue project takes a fresh look at how these public funds are raised, focusing on innovative ideas for retooling local systems to align with modern economic realities and treat citizens more fairly. The project involves a series of studies highlighting ideas and guidance to help state and local policy makers think through modernizing outmoded revenue systems.
Rethinking Revenue will provide local governments with tools to help them raise enough revenue for the services their communities need, and to raise that revenue fairly, in ways that are consistent with community values.
Local government revenues that aren't aligned with modern economic realities contribute to distortions in the economy and unfairness in the ways that taxpayers are treated. For example:
- Property Tax: A large part of the value created in the modern economy involves things less tangible than property, like financial instruments, or bits and bytes.
- Sales Tax: Only recently, have sales taxes been applied to online sales. While this has helped keep the sales tax somewhat more relevant, consumers have been shifting more of their purchases to services over the years, which tend to be exempt from sales tax.
- Fines and Fees: Many local governments have become more reliant on fines and fees which are appropriate in many cases because the person who benefits from the service pays for it. However, overuse can lead to unfair and counterproductive outcomes for citizens. View GFOA research on fines and fees.