The government is a crucial player in the economic life of any nation. Even in societies that have well-developed private sector players, provision of some goods and services is left in the hands of the government because the private sector and the non-profit organizations lack either the means or capacity to function effectively. Moreover, the profit motive that drives the private sector would lead to undesirable results if this sector was entrusted with the provision of some goods and services.
The government therefore acts as both a major collector of revenue, mainly in the form of taxes, and a major spender of collected revenues in the provision of goods and services. Government involvement in the economic life of a nation takes two broad forms. Either the central government or the local government can provide goods and service. In the US, local governments have their own sources of income but are mostly dependent on the central government (Fahim, 2005).
The different classes of the local authorities have varying sources of revenue and different ways of spending the revenues. The classes of local government that have the broadest revenue base are the municipilaties and counties while special districts have limited revenue sources dictated by the functions such districts were set up to perform (Fahim, 2005).
For the municipalities, revenue bases include “property taxes and charges, intergovernmental transfers, sales and income tax” (Fahim, 2005). Local governments play a very critical role in modern societies because they are the providers of goods that are essential and basic to life. Some local authorities are responsible for the supply of such basic things as electricity and water, which makes them crucial in the lives of the people in the areas they operate.