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
12 chapters
have results for local law
Chapter I. Historical Introduction 9 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.
- 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
- 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.
- 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.
- From the beginning, the state and local governments that relied upon a form of property tax had to supplement it with other kinds of taxes. The extent of diversification of revenue sources depended upon the economic conditions in particular geographic regions and the changes in those conditions over time. The most popular forms of diversification are taxes on production, use, or consumption of goods and services (sales, excise, use and gross receipts taxes). Diversification of revenue sources has permitted state and local governments to stabilize and increase their tax yields.
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Chapter II. State and Local Government Revenue Sources 129 results (showing 5 best matches)
- Local governments were slower to utilize sales taxes, mainly because states, which must delegate taxing authority to local governments (see II A(2)(a), above), have tended to guard consumption taxes as a source of revenue. The sales tax is, however, an important local revenue source in states where local property tax rates are severely limited; and local governments in two thirds of the states now levy sales taxes.
- The typical statute authorizing local sales taxes is enabling rather than mandatory, thus permitting local governments to exercise discretion with respect to the imposition of the tax. The rates of local government general sales taxes are frequently restricted by state statutes. On the other hand, home rule municipalities often may impose special excises without express statutory authorization; and local government special excises (such as taxes on alcohol or gasoline) are usually collected directly by larger local governments.
- State aid remains extremely important for most local governments. In 1982, state aid averaged 29.1% of total local government revenues. In 2002, that figure had increased to almost 37%. By far the greatest amount of aid was for public education and public welfare programs, but significant amounts also were received for support of health and hospital services, roads and highways, as well as general local government support. Also, in recent years, state tax expenditure programs, such as tax credits to encourage private investment in local affordable housing and economic development programs, have had significant impact on local government budgets. (See II M, below.) There are, however, wide variations from state to state. Furthermore, the proportion of local government revenue from the state varies from one local government to another within any particular state.
- Once an assessment or notice of deficiency has been fully appealed under the applicable state procedures (see II L(2), below), the relevant state or local agency may begin collection proceedings. Such proceedings usually involve granting the taxpayer a brief time to pay, and penalizing any delay after that date. The taxing authorities may engage in enforced collection by whatever means are provided by state law.
- The power to tax is an inherent attribute of state authority. But this power is not limitless. Federal and state constitutional provisions place important restrictions on the power to tax. For example, several state constitutions place limits upon the rates of state real property or sales taxes. Local governments, as creatures of the state, do not have inherent power to tax but must be specifically authorized to impose taxes by state statutory or constitutional provisions. These authorizing provisions, in turn, regulate the rates and operation of local government taxes. Courts in some states, however, have ruled that the power to impose certain taxes can be implied from broad “home rule” grants (general state constitutional provisions which grant partial autonomy to local governments). Municipal charters often place additional restrictions upon local taxing power, , a requirement that increases in the municipal sales tax rate must be approved by the local electorate.
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Chapter III. State and Local Government Expenditure Patterns 40 results (showing 5 best matches)
- The daily operations of public sector unions are governed by state law because the National Labor Relations Act exempts state and local governments from its coverage. Most states have, however, enacted laws patterned after this federal legislation, thereby authorizing state and local government employees to engage in traditional collective bargaining activities, except the right to strike. To compensate for the strike prohibition, many states authorize resort to alternative dispute resolution techniques such as mediation, fact-finding (also known as advisory arbitration), and binding arbitration.
- requirements, specific appropriations laws and program enabling legislation impose limitations on state and local government spending practices. Although courts are generally sympathetic to the plight of harried state and local officials seeking to discharge their day-to-day duties, they will not permit spending of public funds that is not authorized by law. For example, if a state statute requires substantial changes in urban renewal plans to be formally approved through a public hearing process, courts have ruled that spending funds for any purpose not approved at a formal hearing is unauthorized and that officials who approve such spending are personally liable. Similarly, New Jersey statutes providing for municipalities to receive a share of the proceeds of several different taxes collected by the State have been held to require specific appropriations by the legislature of the funds generated by those taxes before the funds can be distributed to eligible municipalities. In the...
- However, a legislature’s failure to follow state laws (or local charter provisions) requiring the adoption of a single operating budget and a single appropriations bill has resulted in the judicial invalidation of subsequent piecemeal appropriation bills. The normal requirements for legislative action—formal introduction of bills, public hearings by legislative committees, public debate and legislative vote—apply to appropriations bills.
- 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).)
- Over the past sixty years, state aid as a percentage of local public school revenue has increased from less than 20% to almost 50%, while local property taxes have declined from more than 80% of the total to just over 40%. Federal aid has increased from less than 1% to approximately 7% of local public school revenues.
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Preface 5 results
- 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.
- 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.
- 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.
- This book focuses upon three main concerns: (1) the requirements contained in state laws controlling
- 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 86 results (showing 5 best matches)
- At the local level, the procedure is slightly different. Local legislative approval must be obtained for a bond issue through the enactment of an ordinance or resolution which specifies the purpose and terms of the issue. In a few states, the local governing body must also apply to a special state board or agency for approval of the proposed issue prior to enactment of the bond issue ordinance.
- Though state debt often must be approved by an administrative agency, only a few states require administrative approval prior to the issuance of local government debt. Louisiana and North Carolina require local governments to obtain prior approval both from their local voters and from a state administrative agency. In Nevada, approval must be obtained from the county General Obligation Bond Commission.
- Questions of ordinary breach of contract are governed by general state contract law. However, if a state or local government repudiates its debt or repeals provisions which provide security for its debt, it might violate the contract clause of the United States Constitution. It provides: “No State shall … pass any … law impairing the Obligation of Contracts.” Many state constitutions contain similar provisions.
- The public purpose doctrine has been a part of state and local government law since the inception of the Union. The limitation of credit doctrine, however, was added in reaction to some spectacular defaults of financial schemes involving railroad expansion in the Nineteenth Century. (See I A, above, and IV I(2), below.) Persons with memories of those times are long buried, and modern pressures have increased for more direct state and local government involvement in activities that traditionally were in the hands of the private sector, such as job development, economic expansion, housing, health services and student financial aid. As a result, the courts have had to deal with thorny separation of powers questions involving the proper role of the judiciary in reviewing legislative responses to these pressures.
- 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.
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Index 15 results (showing 5 best matches)
Title Page 4 results
Outline 11 results (showing 5 best matches)
Acknowledgements 3 results
- , 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.
- New York University School of Law for permission to paraphrase material from Shores, 127, 131-136, 167-168 (1982) (1982). Copyright © 1982 by New York University School of Law. All rights reserved.
- Duquesne Law Review for permission to paraphrase material from Herman C. McCloud,
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Advisory Board 11 results (showing 5 best matches)
Copyright Page 1 result
- 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.
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- 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.