Easing State Restraints on Local Taxing Power Can Strengthen Democracy, Promote Prosperity and Equity

(State-generated revenues covered another 40 percent and federal aid covered the remaining 25 percent.) The federal share of combined state and local revenues was slightly higher in 2020 than in much of the recent past, due to COVID-19 relief and recovery measures in in 2020 and 2021, when Congress transferred a large amount of funds to state governments as part of the CARES Act, the Coronavirus R. [...] In 2020, the Washington State Supreme Court refused to take up the measure, reaffirming the lower court decisions and in effect striking down the measure for the final time.c The result of the court saga is that Washington localities can now choose to impose a 1 percent flat income tax, due to the invalidating of the 1984 law, although none have chosen to do so.d At the same time, localities may n. [...] But the newest and largest wave began with the launch of the anti-tax revolt in the 1970’s, took on renewed steam in the 1990’s with the advent of harsh controls on local (and state) revenues such as TABOR in Colorado and new property tax restrictions in dozens of states, and in the past 15 years has expanded to include state constraints on emerging sources of revenue. [...] In the succeeding decades, Proposition 13 forced the state to shoulder a much larger share of community funding obligations and contributed to significant disinvestment from K-12 schools, higher education, and other priorities;b pushed local governments to rely excessively on fines, fees, and other regressive revenue sources; and undermined communities’ ability to meet basic needs and fund investm. [...] Some state examples include: • Arizona adopted a pair of restraints in the early 1980’s, one that limits spending growth in cities and counties to annual increases in the cost of living and population growth and another that limits school district spending to adjustments based on changes in student population and cost of living.