This piece originally appeared at State Capacitance.
The movement to establish budgeting began in cities in the first decade of the 1900s. States followed suit and adopted budgeting in the 1910s, while the federal government was the last adopter in 1921. The rise of budgeting is a worthwhile topic. But it also raises a different question: if budgeting wasn’t adopted until after 1900, what exactly did states and cities do before this?
First, start with what they didn’t do. States and cities didn’t compare estimated spending to estimated revenue. They didn’t impose stable and predetermined tax rates. Their legislators didn’t even know how much money they were spending.
Their system was surprisingly simple: once the legislature’s session ended, the government figured out how spending they had voted for and divided this burden pro rata among the taxpayers.
This local property tax – called the General Property Tax – turns assumptions about taxation on their head, as it lacked almost every feature of modern government finance.
