Local Tax: What It Is and Types

What Is a Local Tax? A local tax is an assessment by a state, county, or municipality to fund public services ranging from schools and highways to garbage collection and sewer maintenance. Local taxes come in many forms, from property taxes and payroll taxes to sales taxes and licensing fees. They vary widely from one jurisdiction to the next. Taxes levied by cities and towns are also referred to as municipal taxes.Key TakeawaysAll but eight states impose an income tax, which is withheld from employee paychecks.Most states and some cities and towns impose sales taxes on goods and services.For most homeowners, the property tax bill is the biggest single local tax they pay. Understanding Local Taxes The U.S. Constitution gives the federal government the authority, and the states the right, to impose taxes on their residents. Local taxes fund services including police and fire departments, education and health services, libraries, road maintenance, and other programs and projects that ben...