How are local governments funded in the United States?

Local governments in the United States are funded through a combination of locally determined taxes, federal and state grants, and various fees.12

Primary Revenue Sources

• Property Taxes: This remains the most significant source of local tax revenue. By providing a stable base, property taxes support the fiscal independence of local governments, allowing for decentralized governance and local control over public services.13
• Locally Determined Taxes: Beyond property taxes, local governments utilize a variety of other taxes to fund their operations, though the specific mix depends on state-granted authority.12
• Fees: Citizens often pay specific charges that function as taxes to support local services, such as vehicle registration fees, city or village vehicle stickers, pet licenses, and tollway charges.4

Intergovernmental Funding

• Grants-in-Aid: Local governments receive funding from federal and state governments through grants-in-aid. These are often designated for specific purposes, such as education, housing assistance, public aid, and health programs like Medicaid.12
• Revenue Sharing: Historically, programs like general revenue sharing have provided direct financial assistance to local administrations, though the availability and scale of such funding have fluctuated over time.1