Why is state and local tax policy important?
Just think about the services people rely on day-to-day — schools for their kids, roads for commuting, and police and fire protection for emergencies. Some of the money comes from the federal government, but much is raised locally and, importantly, state and local governments deliver the services. If the federal government cuts back, then state and local governments have to provide fewer services to people or figure out how to raise more money. States typically operate under a balanced budget rule. So, the amount of money they propose spending needs to equal the amount they expect to raise. States are allowed to go into debt, with restrictions, for capital projects or to meet the day-to-day functioning of government. But borrowed funds for day-to-day needs must be paid back within the year. Urban Institute has looked closely at the expenditure side of what state and local governments do — especially the impact on working families. Going forward we hope to examine the interplay in feder
