Local revenue diversification : user charges Page: III
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Local Revenue Diversification
Introductory Notes
This study is one of a series done by staff and consultants of the Advisory
Commission on Intergovernmental Relations on ways in which local
governments can lessen their reliance on property taxes by diversifying
their revenue bases.
For many years, the local property tax has been the fiscal mainstay of
local governments, and it remains their major revenue source. Its dominant
role has been due to its many virtues as a revenue raiser: for local
governments it is easily enforced because a tax on land and buildings is
virtually impossible to evade or avoid; it is capable of generating large
amounts of revenue; rates are easily adjusted; its ad valorem character
makes it the only tax presently employed in the United States that taxes
unrealized capital gains. While this last characteristic is popular with tax
administrators, it makes the levy unpopular with those who must pay the
property tax, and it can create a serious burden for the elderly and lowincome
homeowners and farmers.
Given the acknowledged strengths of the property tax as a revenue
raiser, why should local governments wish to resort to other types of
taxes? One of the major reasons is that the inflation of the late 1970s emphasized
one of the major shortcomings of the property tax-because it
taps unrealized capital gains, it is capriciously related to the flow of cash
into a taxpayer's pockets. As inflation sharply increased land values,
property tax bills increased, and taxpayers became increasingly irate and
fearful that steadily rising property taxes would force them to sell their
homes. The passage of Proposition 13 in California in 1978 marked the
most dramatic effort to shield homeowners by capping property taxes.
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United States. Advisory Commission on Intergovernmental Relations. Local revenue diversification : user charges, book, October 1987; Washington, D.C.. (https://digital.library.unt.edu/ark:/67531/metadc1064/m1/5/: accessed April 23, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.