The Difference Between Federal, State and Local Governments’ Budgets

In the U.S. the federal, state and local governments all make laws and budgets. Each system and agency has different responsibilities and they all exist and function simultaneously.

The federal government encompasses the country as a whole. The federal government gets the money it spends, mainly through taxation. Roughly 80% of revenue comes from the individual income tax and the payroll taxes that fund social insurance programs. Another 9% comes from the corporate income tax, and the rest is from a mix of sources. 

The state and local governments only encompass their own state, districts, counties, and cities, etc. For state and local governments, property taxes make up the largest category of revenue at thirty-five percent. Sales and gross receipts are a close second at thirty-four percent. The corporate income tax is the smallest at a mere three percent of the money taken in.

Besides where their revenue comes from the difference between Federal, State and Local governments comes into play with their annual budgets. Every year in city halls, state capitols and the U.S. Capitol, agencies gather to debate and adopt their budgets. This is the most important policy document because it dictates the government’s priorities for the upcoming year.

State and local governments are required by law to balance their budgets to that they are never spending more then they’re bringing in. The National Conference of State Legislature reported that 49 out of 50 states have balanced budget requirements, with Vermont the sole exception.

The federal government is allowed to run a deficit and to borrow money to meet its obligations. Which means that the government can spend more than it brings in revenue. Congress has made efforts to pass a balanced budget amendment to the U.S. Constitution with no success.

But this exception is a big difference between Federal, State and Local governments and their budgets.

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