Governing States and Localities, Chapter 4

Budget Deficit, or Shortfall

Cash shortage that results when the amount of money coming into the government falls below the amount being spent.

Revenues

The money governments bring in, mainly from taxes.

American Recovery and Reinvestment Act (ARRA)

A $787 billion federal government package intended to stimulate economic growth during the recession of 2008-2009.

User Fees

Charges levied by governments in exchange for services. Such fees constitute a type of hidden tax.

Excise, or Sin, Taxes

Taxes on alcohol, tobacco, and other similar products that are designed to raise revenues and reduce use.

Estate Taxes

Taxes levied on a person's estate or total holdings after that person's death.

Gift Taxes

Taxes imposed on money transfers made during an individual's lifetime.

Sales Taxes

Taxes levied by state and local governments on purchases.

Focused Consumption Taxes

Taxes that do not alter spending habits or behavior patterns and therefore do not distort the distribution of resources.

Regressive Taxes

Taxes levied on all taxpayers, regardless of income or ability to pay; they tend to place proportionately more of a burden on those with lower incomes.

Tax Burden

A measurement of taxes paid as a proportion of income.

Income Taxes

Taxes on wages and interest earned.

Progressive Tax System

A system of taxation in which the rate paid reflects ability to pay.

Severance Taxes

Taxes on natural resources removed from a state.

Insurance Trust Funds

Money collected from contributions, assessments, insurance premiums, and payroll taxes.

Intergovernmental Transfers

Funds provided by the federal government to state governments and by state governments to local governments.

Tax Capacity

A measure of the ability to pay taxes

.Tax Effort

A measure of taxes paid relative to the ability to pay taxes.

Dividend

A payment made to stockholders (or, in Alaska's case, residents) from the interest generated by an investment.

Capital Investments

Investments in infrastructure, such as roads

General Obligation Bonds

Investments secured by the taxing power of the jurisdiction that issues them.

Revenue Bonds

Investments secured by the revenue generated by a state or municipal project.

Municipal Bonds

Bonds issued by states, counties, cities, and towns to fund large projects as well as operating budgets. Income from such bonds is exempt from federal taxes and from state and local taxes for the investors who live in the state where they are issued.

Bonds

Certificates that are evidence of debts on which the issuer promises to pay the holders a specified amount of interest for a specified length of time and to repay the loans on their maturity.

Budget Process

The procedure by which state and local governments assess revenues and set budgets

Fiscal Year

The annual accounting period used by a government.

Balanced Budget

A budge in which current expenditures are equal to or less than income.

Expenditures

Money spent by government

Discretionary Spending

Spending controlled in annual appropriations acts.

Fiscal Federalism

The system by which federal grants are used to fund programs and services provided by state and local governments.

Entitlement

A service that government must provide, regardless of the cost.