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79 <br />Appendix A <br />In order to determine the true amount of government provided goods and services <br />citizens are receiving and paying for, it is helpful to calculate how much citizens pay in federal, <br />state, and local taxes and how many of these upper level government taxes are transferred to the <br />local governments. Consider the simplifying example of a county that consists of 100 people <br />who each pay taxes of $100 to the federal government, $25 to the state government, and $10 to <br />the local government. These citizens have a total tax bill of $135. Assume that the local <br />government provides a service for each citizen that costs $50. However, not all of the taxes paid <br />to the federal and state tax governments are used at the federal and state level. Suppose that the <br />federal and state governments transfer $30 and $10 respectively to the local government to help <br />fund the local government provided service that costs $50. In short, the federal and state <br />governments are serving as a `tax collector' for the local government. There would be no <br />difference between the federal and state governments collecting $125 in taxes and transferring <br />$40 to the local government or the federal and state governments collecting $70 and $15 in taxes <br />respectively and having the local government collect $50 in taxes. <br />CCM Economics, LLC Orange County Tax Equity Page 42 <br />