Financing Municipal Government
by FRED M. OLIVER Partner, Salt Lake City Office
Presented before the Annual Meeting of the Wyoming Association
of Municipalities, Jackson, Wyoming—June 1963
SINCE the early beginnings of local government in the United States primary dependence has traditionally been placed on the property tax as the major source of revenue for financing the basic services of government.
The primary reason for this was based on the fundamental concept that the services originally performed were the protection of life and property
and that the cost of such services should be levied on those who received the benefit of such services.
Thus, the "benefits received" principle became the traditional basis for determining which segment of the population to impose the costs of local government upon. This principle has withstood the test of time and even today is still the cornerstone of taxation for local government. Despite all of the historical increases in property tax rates generally, the "raise that breaks its back" has not yet arrived.
Some 1962 statistics, drawn from data in United States Census Bureau publications, bear out the conclusion mentioned above. Of all tax revenues received by local governments in the United States in that year, 87% came from property taxes and only 13% from non-property tax sources. In 1952, ten years before, 88% of total tax revenues came from the traditional property tax.
However, when the relationship of property tax revenues to total revenues of all local governments in the United States is considered, a noticeably different trend is observed. In 1961, for example, of the total income
received by state and local governments in the United States, only 39% was from the general property tax. This point was reached in 1961 after a long period of gradual departure from the property tax as a base of taxation.
Gradual Shift to Non-property Taxes
It was in the mid-thirties that the trend away from this traditional reliance
on the property tax first became noticeably discernible, although a very gradual change in this direction actually began as far back as 1900. A sharp acceleration occurred after World War II. For example, between the years of 1942 and 1949, in all cities having 1940 populations of 25,000 or more, property taxes collected increased 223%. Other types of revenues,