Reply #25: Problem with the income taxes is

[Yupster]

so much is paid by the upper few percent. Their income changes the most dramatically from year to year.

A rich person may have almost all his money in stocks. In a good year he may pay millions in capital gains taxes. In a bad year, he owes zero. If your budget depends on that, you will see huge swings in the amount of income your city takes in.

There was a story in USA today not long ago comparing why Gerogia's state budget was not a big problem this year and California's was. It pointed out that the main difference was that California depends so heavily on state income taxes and when the stock market had three bad years in a row, California's tax receipts got reamed. Georgia, depending on property and sales taxes much more saw only slight changes in its intakes.

To run your state you need a fairly steady and reliable source of income, so it better not be reliant on stock gains.