7-a - Report on the Orange County Tax Equity Study

Browse Search

CCM Economics, LLC Orange County Tax Equity Page 9 to different governments, etc. Table 3 shows the sources of spending and receipts by federal and state/local governments and displays some interesting mechanisms of fiscal federalism.8 Note that approximately 30% of state and local government receipts are from grants from the federal government to the various subnational governments. We also see that state and local governments actually account for 63% of government expenditures on goods and services, while the federal government accounts for 73% of transfer payments to persons and households. Additionally, one should note that of the $978.1 in government expenditures for goods and services made by the federal government, $732.2 billion is for national defense. Therefore, state and local governments account for 87% of non-defense related government expenditures for goods and services. In short, most government expenditures occur and the state and local level and most transfer payments occur at the federal level. Because of the structure of the current progressive tax code and the fiscal federalism system, there will always be some states/counties/cities/households that will pay ‘more’ in taxes than they ‘receive’ in benefits. Table 3. Government Receipts and Spending, 2016 ($ bn) All Govt Federal State/Local Government Receipts (all sources) 5,319.6 3,497.8 2,372.9 Taxes 3,744.3 2,153.6 1,590.8 Social Insurance Taxes 1,251.9 1,232.6 19.3 Current Transfer Receipts from others/govts 214.2 73.4 691.9 Income from assets 131.6 49.2 82.4 Expenditures for goods/services 2,655.2 978.1 1677.1 Transfer Payments to persons 2,796.3 2,047.9 695.2 Transfer Payments to other govt 604.4 Interest 666.3 474.1 192.3 Subsidies 59.2 58.7 0.5 8 Bureau of Economic Analysis, NIPA Accounts. www.bea.gov. Please note that not all columns and rows add up due to rounding and the nature of fiscal federalism. 46