This book provides a nontechnical analysis of state and local finances that is intended to provide educators, lawmakers, students, and voters with the background necessary to form intelligent opinions and make effective decisions. The authors summarize current theories of the incidence of the major state and local taxes, assess the capacity of state and local governments to carry debt, and discuss property tax "circuit breakers" and state and local retirement systems. Topics of the individual chapters include development of the federal system; fiscal performance and capacity; federal intergovernmental transfers; state intergovernmental transfers; state taxes on individual income and sales; other state taxes; the property tax; nonproperty taxes and nontax revenue; state and local debt; earmarked revenues, retirement systems, and capital budgets; and the future of state and local finance. (Author/JG)