State and Local Taxation and Finance in a Nutshell
Authors:
Gelfand, M. David / Mintz, Joel A. / Salsich Jr., Peter W.
Edition:
3rd
Copyright Date:
2007
13 chapters
have results for State and Local Taxation and Finance in a Nutshell
Chapter I. Historical Introduction 11 results (showing 5 best matches)
- State and local taxation and finance also have important ramifications for many areas of the law. In addition to their obvious effect upon the development of local government law, cases involving state and local taxation and finance also figure prominently in the fields of constitutional and administrative law.
- This Nutshell begins with general revenue sources, then reviews budgetary matters and concludes with debt financing. Chapter II This Nutshell first discusses state and local government revenue sources, including various forms of taxes, license fees, special assessments, “gaming” revenues, fines, and intergovernmental aid (see Chapter II). The next Chapter III considers state and local government expenditure patterns (for current, ongoing expenses), including budgetary requirements and responses to fiscal crises. The fourth and final chapter describes and analyzes state and local government debt financing and capital spending.
- State and local government taxes, expenditure patterns and debt financing have become increasingly important since World War II, because the state and local sector of the U. S. economy has expanded greatly during this period. The fairly high level of state and local government borrowing has important effects upon the banking industry, credit markets, and other aspects of the national economy. Developments in state and local taxation and spending can also have significant impacts upon the expansion or decline of private businesses. Therefore, the substantial publicity surrounding the 1982 Washington Public Power Supply System default and the local government fiscal crises of the last three decades—in Orange County, California, Camden, New Jersey, Cleveland, Ohio and New York City—is not surprising. (See III E, IV F(1), and IV H (3)–(4), below.)
- Because these early restrictions did not apply to local governments, they were free to finance the railroad boom of the mid-Nineteenth Century by floating general obligation debt. Soon, however, many municipalities became overextended, just as several states had been earlier in the century. Many municipal bond defaults occurred during the depression of 1873–1879 and the panic and depression of 1893. As a result, local government lending of credit prohibitions, debt ceilings, and referenda requirements were added to state constitutions and statutes to restrict municipal debt financing, just as policymakers had added the earlier limits to restrict state debt-financing activities. Over time, exceptions to these restrictions have been developed, and it has become clear that neither debt ceilings nor referenda requirements are sufficient to ensure state and local fiscal integrity or to prevent periodic financial crises.
- PART B. THE INCREASING SIGNIFICANCE OF STATE AND LOCAL GOVERNMENT TAXATION AND FINANCE SINCE WORLD WAR II
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Preface 7 results (showing 5 best matches)
- Against this backdrop, the authors have prepared this “nutshell” on State and Local Taxation and Finance. Like others in the West Nutshell Series, this book was originally intended primarily for the law student confronting the topic for the first time. Many readers’ comments on the First Edition, however, assured us that public policy and business school students, practicing lawyers, and public officials have found much of the book useful.
- Public finance has taken on new significance in the past several decades. Serious fiscal crises in several major American cities, shifts in attitudes regarding state and federal social programs, and an explosion in the use of tax-exempt bonds have brought a topic once thought to be the exclusive province of public finance specialists to the attention of the American public at large. Law schools, in particular, have added courses on state and local taxation and finance to their curricula, and law students increasingly view municipal bond firms and state and local government agencies as respectable potential employers. Business schools and public policy schools have continued to give attention to the important topic of public finance.
- This book focuses upon three main concerns: (1) the requirements contained in state laws controlling whether a particular tax or debt obligation is authorized; (2) federal and state constitutional limitations upon the exercise of taxing and borrowing powers; and (3) the rules for actually engaging in taxation, expenditures, or debt financing. Whenever possible, within the space constraints, the authors have attempted to place these rules and policies within their social and historical context.
- The book should be read as it was written—as an initial discussion and analysis of the main points of law and policy in a highly technical and diverse field. It is not designed as a substitute for careful study of the applicable statutes and local ordinances, the case law interpreting those provisions, and the public policy background. Moreover, the authors hope that many students will use this Nutshell as an adjunct to—but not a substitute for—the texts and treatises they are assigned in their law, business, or public administration courses.
- Law students and lawyers entering the field of public finance will soon find themselves immersed in volumes of very detailed material (bond transcripts can run into the hundreds of pages) that require technical mastery of the subject. However, a full understanding of the relevant documents also requires an appreciation of the interrelated social and political issues. Thus, many public policy questions—ranging from the appropriate role of government in society to the appropriate location of new capital facilities—frequently are central to the approval and implementation of a particular taxation, expenditure, or borrowing proposal. Moreover, responses to periodic fiscal crises (many of which are analyzed in this book) require both imagination and respect for settled expectations. Therefore, lawyers and others involved in public finance must be fully conversant with both technical legal rules and the broader public policy issues.
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Chapter IV. State and Local Government Debt Financing and Capital Expenditures 283 results (showing 5 best matches)
- Usually, the amount of interest paid on a state or local government general obligation bond is low in comparison to the prevailing interest rates for comparable corporate bonds. The lower rates result primarily from the fact that interest on state and local government obligations is exempt from federal and state income taxation (in the state of issuance). The exemption from federal income taxation is provided by Section 103 of the Internal Revenue Code. The exemption from state and local taxation afforded these bonds is found in state constitutional or statutory provisions. The general pattern is for a state to exempt from its income taxes interest on any bonds issued by the state or its agencies or issued by local governments located within the state, but to tax interest derived from bonds issued by other states or their political subdivisions.
- —A written obligation which binds the signatory to pay a sum certain upon the happening of an event. In the context of state and local government finance, an oft-quoted, wordy definition is “evidence(s) of indebtedness, issued by states, cities, towns, or other corporate public bodies, negotiable in form, payable at a designated future time, and intended for sale … with the object of raising money for municipal improvements, the expense of which is beyond the immediate resources of reasonable taxation, and payment of which is necessarily or logically should be distributed over a period of years.”
- Ceilings upon state debt first appeared in state constitutions in the mid-Nineteenth Century, in response to state defaults and suspensions of payments on state debt in the 1840s. In the last decade of the Nineteenth Century, local debt ceilings were added to state constitutions to restrict the debt-financing activities of municipalities, just as the earlier limits had restricted debt-financing by states. Restrictions upon the lending of public credit (see IV C(2) and IV F(2), above) were also adopted to restrain states, and later local governments, from using their tax revenues to finance unsuccessful private entrepreneurial activities. The investments, crises, and defaults that preceded these constitutional restrictions upon state and local debt are described in Part I A, above.
- Debt-financing plays an important role in state and local government efforts to provide public services. Since the early 1800s, governments have borrowed money to pave roads, build schools, lay sewers and finance other public works. In recent years, public debt-financing has been employed to raise capital to finance a myriad of services including economic development programs, housing for low and moderate-income families, hospital construction, sports stadiums, pollution control facilities, and student loans.
- Many states exclude debt incurred for certain purposes, ( , financing of water and sewer improvements) from the substantive debt ceiling applicable to their state and/or local governments. As a result, debt can be incurred to finance these activities and projects even after the governmental entity involved has reached its debt ceiling.
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Chapter III. State and Local Government Expenditure Patterns 76 results (showing 5 best matches)
- Because of the traditional reliance on the local property tax as a source of funds for public education, shifts in population and wealth resulted in a serious fiscal imbalance among local school districts in many states by the mid to late 1960s. The severity of the problem was clear when the finances of inner city school districts and rural districts were compared to wealthy suburban districts (often within the same metropolitan area). Indeed, in the 1960s, it was not unusual for neighboring districts to differ by as much as $500 per pupil in the amount of tax dollars that could be generated for schools by imposing the same rate of taxation. Because state aid was distributed under formulas that guaranteed a minimum amount to all schools and placed particular emphasis on average per pupil daily attendance, the rich districts in many states got richer and the poor districts got poorer.
- In the wake of all the litigation and public controversy, many state legislatures have substantially modified the basic school financing system to redress the imbalances caused by heavy reliance on local property taxes for the funding of public schools. Alternative tax sources have been sought, with a state sales tax increment for education gaining favor in several states.
- One of the major uses of public funds by state and local governments is the support of public elementary and secondary schools. In most states, this support comes in three forms: (1) use of property tax revenues, collected at the local level, for school operational expenses; (2) use of funds produced by tax-exempt bonds, issued by local school districts, to pay for the capital costs of construction and repair of school buildings; and (3) direct state aid to local school districts. State aid, in turn, usually has two components: (a) a flat grant to districts paid on a per pupil basis, and (b) an “equalization grant” to help provide greater equality in educational spending throughout the state.
- Several states and some local governments are subject to statutes that limit their annual expenditures. The first such statutory spending limit was imposed upon Arizona counties and municipalities in 1921. (The Arizona Supreme Court had previously developed a local spending limit, which it saw as the logical corollary to the state’s local levy limits (see II B(2), above).)
- In New Jersey, a slightly different approach was used. The New Jersey Constitution requires that the Legislature provide for the “maintenance and support of a thorough and efficient system of free public schools for the instruction of all the children in the State.” While rejecting an equal protection claim, the New Jersey Supreme Court held that the State’s school financing system, which was similar to those described above, did not satisfy the state constitutional requirement of a “thorough and efficient” system of public education. For the next three years, the Court and the Legislature engaged in a difficult struggle to define an approach that would satisfy the Court’s interpretation of the New Jersey Constitution, yet preserve legislative control over taxing and spending decisions. After a Court order closing all the public schools in the state, the Legislature finally enacted New Jersey’s first state income tax to fund an education finance reform package. These reforms were...
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Chapter II. State and Local Government Revenue Sources 336 results (showing 5 best matches)
- These modern state sovereignty and state sovereign immunity cases have direct implications for state and local taxation and finance. Even before
- The federal Constitution and state constitutions place various restrictions upon the taxing power of state and local governments. The principal state constitutional constraints are contained in provisions restricting the types of taxes and limiting their rates, public purpose requirements, and uniformity and equal protection provisions. (Many restrictions upon local taxation also appear in state statutes.) The United States Constitution places several constraints upon the operation of state and local taxes. The principal provisions involved are the equal protection, due process, and commerce clauses. Also, some cases arise under the supremacy clause or the privileges and immunities clause.
- In most states, both the state and local governments impose use taxes as a supplement to their sales taxes. Local governments are authorized to levy the tax either through their home rule powers or by special legislation (see II A(2)(a), above). But, like the sales tax, the use tax is generally collected by the state (see II E(2)(e), above). To reduce the potential for multiple taxation, most state and local governments provide for a credit or exemption from their use tax if the out-of-state purchase of goods was subject to a sales tax in the state of purchase.
- In the future, the limits placed by the federal Constitution upon the power of state and local governments to impose use taxes may be tested in the context of a state or local tax imposed on interstate electronic commerce. ( II B(2)(c)(ii).) Congress has imposed a temporary moratorium on state and local taxation of Internet sales. However, Congress seems likely to be pressured by state governors (concerned about potential losses of state tax revenues from increasing interstate electronic commerce) to end that moratorium.
- Municipalities must be authorized by state legislation or by local charter, if the home rule delegation is broad enough to encompass the taxing power, to raise revenue through special assessments. As with general taxation and debt-financing, the particulars of the authorizing legislation must be observed. Failure to do so can result in invalidation of the special assessment. Strict observation of statutory procedures is required, and doubtful cases are construed against the municipality and in favor of the taxpayer.
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Title Page 4 results
Outline 83 results (showing 5 best matches)
- B. The Increasing Significance of State and Local Government Taxation and Finance Since World War II
- CHAPTER IV. STATE AND LOCAL GOVERNMENT DEBT FINANCING AND CAPITAL EXPENDITURES
- G. Federal Statutory Regulation of State and Local Debt Financing
- I. Debt Ceilings and Other Restrictions on the Amount of State and Local Debt
- CHAPTER II. STATE AND LOCAL GOVERNMENT REVENUE SOURCES
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Copyright Page 4 results
- Nutshell Series, In a Nutshell
- Thomson/West have created this publication to provide you with accurate and authoritative information concerning the subject matter covered. However, this publication was not necessarily prepared by persons licensed to practice law in a particular jurisdiction. Thomson/West are not engaged in rendering legal or other professional advice, and this publication is not a substitute for the advice of an attorney. If you require legal or other expert advice, you should seek the services of a competent attorney or other professional.
- Printed in the United States of America
- © West, a Thomson business, 2000
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Acknowledgements 7 results (showing 5 best matches)
- , the national quarterly journal on state and local government of the American Bar Association, as it appeared in Volume 16, Number 4 (Fall 1984), Robert H. Freilich, editor.
- State Taxation of Interstate Commerce—Quiet Revolution or Much Ado About Nothing?
- Matthew Bender and Company, Inc., one of the LEXIS Publishing companies, for permission to cite and paraphrase material from M
- and S
- Sales Tax and Use Tax: Historical Developments and Differing Features
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Index 223 results (showing 5 best matches)
Dedication 1 result
- Publication Date: July 13th, 2007
- ISBN: 9780314183873
- Subject: Taxation
- Series: Nutshells
- Type: Overviews
- Description: This guide is a fully updated summary of state and federal laws that pertain to public finance and taxation. It is a valuable supplement to law school courses on local government law and state and municipal finance, as well as course offerings on these topics in schools of business and public policy. The book places the technical legal rules it considers in the context of the broader public policy issues that those rules raise. It focuses on several past fiscal crises as a catalyst for, as well as a source of, doctrinal changes in these areas of the law.
