State taxing and spending

0:00- [Narrator] So let's think a little bit about states and the money that they collect and how they spend that money. And we're going to focus on Virginia, which has a budget, at the time that I'm making this video, of roughly $88 billion per year. And just to get a sense of that, the state of Virginia has roughly 8.7 million people.

0:19So that's roughly a little bit more than $10,000 per person per year that it's spending on many different things. And we have a total budget of $88 billion. But here's a subset of that. This is the general fund where we can see we're spending 20 billion on health and human resources.

0:39This is primarily healthcare, things like Medicaid, which is healthcare for those in need. You have 20 billion roughly on K-12 education, another 7 billion on higher education. And then it breaks down into things like 5.4 billion on public safety. Now, there's other expenditures that they have, but those aren't necessarily coming out of the general fund.

1:00Those might be coming from sources of revenue that are already going to be dedicated to say for the roads, or for certain safety things, or for certain aspects of healthcare. Now, where do you think this money comes from? Well, it comes from some form of taxes.

1:19And if we look at this chart, we can see the major sources of that. Most of it is coming from individual income tax. Not all states have an income tax. And even the ones that do have an income tax, some of them have a progressive tax code, some of them are moving more towards a flat tax.

1:38Virginia has a progressive tax code and that income tax, the state income tax, generates $30, almost $40 billion a year. Then you see sales and use tax. This is primarily sales tax. It's 9.6 billion roughly. You have about four billion from corporate taxes, and then you have other sources of revenue.

1:59Now, this is not the only sources of revenue 'cause you can see that this is not adding up to $88 billion. And Virginia actually, actually like many states, has to have a balanced budget. And so it has other sources of revenue. This is non-general fund revenue, and these are things that are specifically used for certain things.

2:18The legislature of Virginia does not have as much power to figure out how this gets spent. So 40, almost 46 billion in federal grants and contracts, we can see other things, other sources of revenue, licenses, rights and privileges. We can see other forms of taxes, other forms of sales taxes that are going to specific things.

2:39So these are non-general funds. So the whole point of this video is not to get into the weeds and make you someone who can work in the tax office in Virginia, although that might be something that you want to do. But it's to appreciate that a lot of money is getting spent at the state level.

2:54And it's good to know where that money is, well, one, where is it being spent, and where is that money coming from? Now, not every state is the same, but what we're seeing in Virginia is pretty typical of a lot of places.