POLS 207 1nd Edition Lecture 7Outline of Last Lecture I. Politics of U.S. Federalism II. American Law III. US Constitution IV. State Constitutions V. Texas Constitution VI. Growth of Federal Power VII. Federal Funds Given to State and Local Gov’ts VIII. Federal Grant System Advantages IX. Problems of Federal Grant SystemOutline of Current Lecture I. Tax Effort Vs. Tax Burden II. Taxes have shifted over the years III. State Revenue and Expenditures IV. State and Local Government Revenue Sources V. State and Local Government Expenditures VI. State Government Revenue from Own Sources VII. State Government Revenue Overview VIII. The Budget IX. Tax Models Current LectureI. Tax Effort Vs. Tax Burden a. Winning big in Texas isn’t getting more out of the gov’t, it’s paying less b. Tax effort i. Is used to describe a gov’t ii. Tax revenue divided by the total income (GPI) c. Tax burden i. Used to describe an individual ii. Taxes paid divided by salary d. Multiply the tax rate by the tax base i. You want to have a low tax base e. United States often have some of the lowest tax and non-tax receipts as a percentage of gross domestic product compared to other countries II. Taxes have shifted over the years These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.a. From corporate to individual b. High income to low income III. State Revenues and Expenditures a. An unbalanced budget is one where expenditures exceed revenues b. During the depression/recession, all states had a balanced budget c. Stimulus $i. New York and California stimulated the economy by building roads, hiring teachers, etc. ii. Texas lowered taxes IV. State and Local Government Revenue Sources a. #1 (51%) of state and local revenue is state and local taxes b. Federal support (25%) c. Other (24%)d. State i. Sizable chunk from federal ii. A sliver from local iii. Most from own revenue e. Local i. Sizable chunk from state ii. A sliver from federal iii. Most own revenue V. State and Local Government Expendituresa. Education – 27% b. Public Welfare – 15% c. Insurance Trust – 11% d. Utilities – 7% e. Highways – 5% f. Hospitals – 5% g. Other – 30% VI. State Government Revenue from Own Sources a. Some states have sales tax; some have income; some have both b. Texas does not have income tax c. Not all states have property tax; Texas’s property tax brings in next to nothing VII. State Government Revenue Overview a. Taxes i. Local – property ii. Federal – income iii. State – sales tax in most states b. Federal grants i. Given for either a general or specific reasonc. Fees and Licenses i. Optional ii. Pay a fee to engage in an activity or use a service 1. Driver’s license2. Attorney license 3. Teaching certificate 4. Electrician and plumber certification 5. Marriage license d. Interest i. Funds generate interest ii. Spend at an equal rate across the year iii. Funds are not received at an equal rate across the year e. Sales i. Government sells stuff f. Borrowing i. All governments borrow money ii. Either short term (a year) or long term (more than a year) VIII. The Budgeta. Texas fiscal year is Sept 1st to August 31st b. Texas meets only once every two years; puts out two budgets (biennial) c. Controller guesses d. General review is spent on anything e. Dedicated is spent on something specific f. Rainy day fund g. Federal funds are increasing h. State taxes are decreasing IX. Tax Models a. Ability to pay i. People with a greater ability to pay (income and assets) should pay more of a percentage, people with lesser income should pay smaller percentage b. Benefit i. People who get more benefits should pay