Financing Government Options
As far as the ability and capacity to finance government options is concerned, there is a need to take the first step towards understanding the different methods states and governments use to generate revenues, the budgeting structure, and communal response through tax remittance. For a city to become successful in financing its major projects, the tax authority and budgeting committee must recognize their roles as the center for growth and attach high levels of significances to every allocation responsibility assigned to them by city government. From a general point of view, property tax and other forms of taxes are the main source of revenue for most American states. The revenues collected from property tax and other taxes are used by respective states to provide goods and services to the public. With respect to the City of Mobile, Alabama, this study is built on the Federal Tax Policy in terms of tax alternatives, the structure and tax administration strategies and how revenues collected from the public on properties are used in provision of public goods and services.
The Mobile City’s (Alabama) Taxes, Revenues, and funding options
City of Mobile taxes and revenues
As already stated, the major sources of revenues for the government of City of Mobile apart from property taxes include local income tax, local sales tax, and user fees (Annual Budget, 2015). As at present, the City of Mobile uses most of the revenues collected from such taxes to finance employees’ salaries and improve the health status of the public. In addition to the tax levied on property holders, the state government has given State representatives the mandate to levy local income tax for the purpose of creating a balance between high income earners and low income earners (Annual Budget, 2015). This is because the government is fully convinced that any surcharges on state income can easily be administered because of its progressive nature, and every State organ should have the opportunity to effectively contribute through tax allocation and implementation. Even though public institutions today seem to have full control over tax allocation, these institutions face the challenge of unstable income taxes because of the changes and differences in payment periods (International Transport Forum & Organization for Economic Co-operation and Development, 2008). Throughout the process of collection, tax collectors and implementing bodies have the views that income tax proceeds appear to be unstable compared to the revenues collected from property taxes. This means that any decision by the Federal government to shift revenues across various institutions in order to avoid any form of shortfall exposes state governments to risks of revenue fluctuations (International Transport Forum & Organization for Economic Co-operation and Development, 2008). This is because most states heavily depend on income tax revenues and at times become vulnerable to similar fluctuations and shifting policies.
Just like the case of income tax, the City of Mobile uses a greater portion of its sales tax to fund major public events and other programs. Currently, Alabama’s local sales tax makes the largest contribution as far as State government earnings and revenue allocation is concerned. The main reason why the government of Alabama advocates for sales tax is because the policies established by the Federal government makes the collection of sales tax easier, and majority of voters have a strong will to cooperate where sales tax is applied than when the government presents any other forms of taxes.
However, application of sales tax as a source of revenue is limited to tax stability and ability to fulfill the financial needs of the public. Therefore, it is true that the government of Alabama cannot comfortably use such sales tax since the taxes are less stable compared to income tax. Contrary to the progressive nature of income tax, the sales taxes are regressive and this compels the government to make adjustments in their collection processes and to mitigate the challenges associated fluctuating prices of mobile phones. One important mitigation strategy is to increase sales tax charges on luxury goods, in which case the tax policy advocates for an increase in charges, but this again affects the behavior of consumers and retailers who may decide to respond negatively to the tax changes by reducing the level of consumption and supply respectively.
Apart from the mentioned two types of taxes, the government of Alabama allows tax institutions to collect user fees from various institutions as charges for the use of public goods and services. One important factor to note is that public institutions are responsible for any social damage, and therefore imposing user fees may be one of the ideal policies the government can use to show its commitment to serving the population. However, some government institutions may collect more user fees than they require, and all the benefits from such fees are enjoyed by particular individuals instead of funding major projects.
The funding option
The policy of tax collection and revenue option could immensely benefit the people of America especially individuals from the City of Mobile, Alabama. The revenue option in this case helps the State government to connect to the needs and preferences of the local community by linking finances to the various government operations including funding public projects like establishment of more district and national schools, development of district and national health facilities as well as construction of roads and other social amenities. With the support from additional taxing authority, local jurisdiction will stand a better chance of ensuring that the local communities and people from Alabama benefit from the government tax policies and funding processes. For example, the decision to establish a local property tax and sales taxes that would require a voting process is meant to improve the ways by which individual users and public institutions contribute towards ensuring equal distribution and allocation of government revenues. Such institutions should be able to understand that any disparity resulting from local revenue options may not necessarily reflect the differences people have in terms of wealth creation. Based on the challenges and bad financial history the State has experienced in the past, the Alabama government aims at creating a balance by establishing subsidiary policy that will provide for stability and equity throughout the processes of revenue supplementation. The final goal of tax reform and funding process for Alabama is to improve revenue allocation in a more transparent and equitable way.
The local government’s annual budgeting documents
The annual budgeting process of the City of Mobile, Alabama, is geared towards funding important functions like public safety, economic development, establishment of better infrastructures and social amenities as well as city financing and strategic development (Chakrabarti, 2014). The government annual budgeting aims at increasing and redirecting capital dollars towards fixing broken facilities and deplorable infrastructural conditions within streets and parks. Some of the funds will be directed towards fixing computer systems and older equipment Alabama uses to conduct its everyday businesses. At the same time, the budget is a reflection of the long needed adjustments towards employee’s compensation and improvement of people’s living standards. According to the budgeting committee (Chakrabarti, 2014), the two areas are more specific to the city’s development and a combination of the two strategic plans will help the city to expand most of its basic services to the public. The budgeting process is therefore a collective plan to invest in the city’s future since the locals feel that the efforts of the government alone cannot help create a stable city (Chakrabarti, 2014). Specifications to the budget and important areas of concern include improving the city’s state of living through generating more revenues, improving the quality of life and allowing the city to grow and expand its services to the public.
As the respective budgeting authorities struggle to improve the quality of life grow the city and also to generate more revenues, Alabama will continue moving to the top of its operations as the fastest and most business friendly city is America (Wildavsky, 2010). As illustrated, the cycle represents a positive change for the people of Mobile Alabama, a change that is pegged on tax policy creation and adjustment in budgeting processes.
The success of the city as presented by the cycle begins when the budget allocation committee becomes good stewards of city’s resources while coordinating with members of the public to address the major challenges as well as taking a collective responsibility towards investing into the city’s future (Wildavsky, 2010). The city government must in this response make its people realize that the Federal government may not be able to provide most of the services the city requires and therefore for any development to exists in the City of Mobile, Alabama, people must contribute ideas, voluntary time and financial resources through an a well-defined public-private partnership.
The impact of public policy decision on receipt of revenues
Before going deep into the impacts of policy decisions of receipts of revenues, it is important to understand that just like in the case of federal government, revenue collection and allocation in the City of Mobile, Alabama, experience problems of deficit balances (Fund, 2008). The deficit balances restrict the rate at which the city government can improve the basic services to the community. Through policy decisions, the respective authorities are required to cut programs while taking into concern all the costs and benefits of increasing revenue collection and allocation. With such increase in deficits, the processes on decision-making are restrained by the decline in city’s capacity to collect and allocate resources in critical areas. As the case stands, the impact of state does not form part of the whole national debate on important components of the budget, however, every policy decision the city government establishes have impact of public response to remit taxes (Fund, 2008).
From the forgoing, taxes are the major sources of government revenues and any policy that affects tax collection have impact on the amount of revenues the government receives for its budgeting purposes. For example, a public policy decision may look forward to increasing or decreasing a tax cut, increasing or decreasing the government expenditure, or borrowing from other financial institutions to increase the budgeting process (Great Britain & Great Britain, 2010). If the government imposes higher taxes on luxury goods, people will buy less of these goods because of the rise in prices. Based on the mentioned observations, it is clear that the amount of revenues collected by the government on every item is reduced because of lower response from consumers. Conversely, if the government decides to lower its taxes on luxury goods, the aggregate consumption of these items will increased as well as the accumulated tax revenue.
The decision by the government to borrow more finances from donors and other financial institutions adds to the amount of collections the city government gets from the public. Government borrowings only become important as part of funds for the government if such funds are directed to specific projects such as construction of schools, hospitals, roads and facilitation of income generating activities.
Economic conditions that affect revenue projections
Revenue projections and long term economic operations are the major aims of proper budget allocations. However, extreme imbalances in economic conditions have impact on revenue collection, allocation and future projections (Fox, 2005). For the case of Mobile City, Alabama, a reduction in consumption and willingness to hold assets reduces the amount of property tax and respective revenues the government obtains from the public. Reduction in consumption and assets holding capacity can be as a result of low employment on the part of the public, low-income levels or high costs of living (Fox, 2005). In cases where the economy is experiencing inflations, the cost of leaving is very high and since people are discouraged from consuming more goods and services, the amount of revenues the government collects through taxes reduces. The high inflation rates raise the cost of assets, and therefore the public will be willing to save rather than spend on costly products. This means that the projected revenues will fail to meet the targets laid by the financial departments. For example, Alabama has been receiving high number of immigrants in the past few decades, adding to the existing population and creating pressure on the city’s ability to expand in areas of production and employment (Fox, 2005). While the city authority is working hard to improve the economic conditions of its population, the amount of gains in terms of revenue collection reduces since majority of the population live under deplorable conditions with no jobs.
As a recommendation to the challenges of extreme economic conditions, the government should adjust its revenue policies to respond to the real experiences of people. For example, working on a progressive tax policy will help in creating social balance between high-income earners and low-income earners (Loeb, 2009). The amount of fees levied on rich families for using some of the public provisions should not be the same as the amount charged on poor families. Comparing a family who owns a vehicle to another family who does not have a vehicle, charging the same amount of tax for road usage may not be the best way to compensate the public in case of road damages.
In most American states such as the City of Mobile, property tax provides at least 95 percent of the country’s total revenues, which the government uses to provide various goods and services to the public. Even though some states are known to finance most of their activities from property taxes (Porter, 2007), other states like City of Mobile use alternative sources of revenue such as local sales, user fees and income taxes, which provide equal financing opportunities just like the property taxes. It is therefore important to understand the US tax policy and revenue allocation processes as provided by the Federal government. In relation to the City of Mobile, Alabama, this study finds out that Federal Tax Policy provides tax alternatives like property tax, income tax and sales tax, advocates for applicable progressive tax structures and uses tax collector and specific institutions for tax administration as well as in collection and allocation of revenues.
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