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A tax base is the total amount of assets that are available within a state or locality such as a city or county to be taxed. The tax base can be comprised of real estate property, income earnings and merchandise sales to consumers.
A tax base is important to understand because it is the foundation for the revenues that are received by a city or state. The tax base can change as values in real estate change or the employment situation in a state changes. These changes dramatically affect the quality of life and level of services that can be provided within a state.
Ad Valorem Taxes
Ad valorem taxes are the types of taxes that cities and counties levy in order to raise revenues. Ad valorem is an assessment made on the value of property. The amount of assessment is made by a city or county’s tax assessor and is based on a fair valuation of property owned by residents.
Cities, counties and other taxing authorities rely on ad valorem to fund roads, municipal buildings, sewerage systems and schools. The taxing authority given to the local jurisdiction allows these taxes to be levied and raised as needed to provide essential services.
State Taxes
Where cities and counties charge ad valorem taxes through property assessments, states charge income and sales taxes. Income taxes are based on income earned by individuals employed within a state. Sales taxes are assessed on all items of merchandise sold by merchants operating in the state. In some rare cases, state may assess personal property but rely heavily on sales and income taxes to raise revenues.
The money collected through tax receipts allow cities to support public education, provide power, support public works projects and support government services provided to residents.
Dwindling Tax Roles
Tough economic times cause individuals to downsize their homes, spend less money on items or choose to move to other areas with better employment opportunities. When this happens, the effect on the tax base can be dramatic. Foreclosures have a tremendous impact on local governments who have to find alternative ways to replace loss revenue.
Many states do not have the ability to borrow extensively in order to support their budgets as the federal government can. This causes states to have to either reduce services that they provide to their residents or raise taxes high enough to make up for loss revenue. As the economy worsens, more belt tightening and hard choices have to be made by both governments and residents.
Outside View of Tax Base
The existence of a stable tax base is one of the criteria that outside rating agencies use to determine the ability of a state or municipality to issue debt. Large public projects require large capital amounts that sometimes may not be readily available. The ability to issue bonds help cities and states make public improvements or build schools or other items of public good.
The basis for whether such an issue is feasible is dependent upon the size of the tax base. It is the tax base from where revenue is derived in order to pay the bonds off and fund the public works projects. It is important for cities and states to ensure that they do not overburden their tax base to the extent that it causes the tax base to dwindle.
A tax base is important to understand because it is the foundation for the revenues that are received by a city or state. The tax base can change as values in real estate change or the employment situation in a state changes. These changes dramatically affect the quality of life and level of services that can be provided within a state.
Ad Valorem Taxes
Ad valorem taxes are the types of taxes that cities and counties levy in order to raise revenues. Ad valorem is an assessment made on the value of property. The amount of assessment is made by a city or county’s tax assessor and is based on a fair valuation of property owned by residents.
Cities, counties and other taxing authorities rely on ad valorem to fund roads, municipal buildings, sewerage systems and schools. The taxing authority given to the local jurisdiction allows these taxes to be levied and raised as needed to provide essential services.
State Taxes
Where cities and counties charge ad valorem taxes through property assessments, states charge income and sales taxes. Income taxes are based on income earned by individuals employed within a state. Sales taxes are assessed on all items of merchandise sold by merchants operating in the state. In some rare cases, state may assess personal property but rely heavily on sales and income taxes to raise revenues.
The money collected through tax receipts allow cities to support public education, provide power, support public works projects and support government services provided to residents.
Dwindling Tax Roles
Tough economic times cause individuals to downsize their homes, spend less money on items or choose to move to other areas with better employment opportunities. When this happens, the effect on the tax base can be dramatic. Foreclosures have a tremendous impact on local governments who have to find alternative ways to replace loss revenue.
Many states do not have the ability to borrow extensively in order to support their budgets as the federal government can. This causes states to have to either reduce services that they provide to their residents or raise taxes high enough to make up for loss revenue. As the economy worsens, more belt tightening and hard choices have to be made by both governments and residents.
Outside View of Tax Base
The existence of a stable tax base is one of the criteria that outside rating agencies use to determine the ability of a state or municipality to issue debt. Large public projects require large capital amounts that sometimes may not be readily available. The ability to issue bonds help cities and states make public improvements or build schools or other items of public good.
The basis for whether such an issue is feasible is dependent upon the size of the tax base. It is the tax base from where revenue is derived in order to pay the bonds off and fund the public works projects. It is important for cities and states to ensure that they do not overburden their tax base to the extent that it causes the tax base to dwindle.
