State and Local Governments' Revenue

Practice Active

In order to gain certain federal funds, states often have to follow specific requirements to actually receive the money. Give an

example of a requirement the federal government might place on a state for such funds. Why do you think the federal government

adds these types of requirements?

For example, the federal government place condition of building new hospitals for granting federal funds.

Explanation:

Most taxpayers believed that state-level taxes may be the only source of government revenue, but it's essential to mention but they're not the only source of state income. State governments also receive a considerable amount of federal government assistance in terms of grants and aids. Federal assistance is being given to states for medicare beneficiaries, education, transportation, and other means-tested welfare programs.

The federal government adds these types of requirements to make sure that the assistance would actually be used for the true purpose and the state government remained accountable for it. The ultimate purpose of these grants was to support those states whose revenue could not cope up with the state requirements or for the bigger projects.