There are several sources of revenues for the local government and some of them include intergovernmental transfers, property taxes, taxes from the sales and gross receipts, individual income taxes, charges and many other miscellaneous receipts. Usually, about 40% of the revenues come from intergovernmental transfers (Williams, 2008). There are two types of intergovernmental transfers and these include; unconditional grants and conditional grants.
For unconditional grants, the local government decides the ways to spend the money while in the conditional grants, the money is spend is specific ways which are dictated to the local government (Decentralization Thematic Team). Property taxes are taxes imposed on people who own properties such as land, buildings among others. These taxes are determined by the market value of that property (Washington State Department of Revenue, 2007). Individual Income tax is the tax obtained from the income of a person.
It is usually paid by people who are self employed, those who are employed by others and even those who are not working but have savings or a pension (Advice guide, 2009). The gross receipts taxes are the taxes imposed by the state on the gross or sales receipts of a business. These taxes are usually passed to the consumer. There are states which impose these taxes and those that do not. States that impose these taxes include Hawaii, Washington, Arizona, among others (Murray, 2009).
The choice of revenue for the local government depends on the amount of money collected and the conditions that come with the money. There are sources that provide a lot of funds but have very strict conditions on how to use the funds. For example the conditional grants provide a lot of funds to the local government but also have many conditions on how to use them. The unconditional grants are better since they provide adequate funds but have no conditions and hence can be used anyhow.
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