The revenues of the federal budget are for the most part made up of taxes on income and profits, which exceed half of the total revenue, and customs duties, constitutionally reserved for the central government. The taxes on oil and those on driving licenses (cars, etc.), as well as part of the income tax itself, are instead attributed to individual states, while the coffers of local governments are mainly fed by property taxes, both real and personal. Among the federal expenditures, those for the service of the public debt, for national defense and for war pensions are in the foreground; States, on the other hand, are required to provide for roads and the maintenance of public order, as well as to subsidize local governments in carrying out the tasks of education, social welfare, etc., which are particularly entrusted to them. The development of federal government expenditures, due first to the war and then to the need to face the crisis, and at the same time the trend of revenues, naturally lower than the expenses during the years of the conflict, in surplus from 1919-20 to 1929-30, income tax, result from the following table, taken from the final balance sheets of the federal budget (in millions of dollars):
This situation naturally also had repercussions on the public debt which had enormous growth during the war and contracted considerably in the period of prosperity and then started to increase again, as shown in the table at the top of the following column.
As of November 15, 1935, the total amount owed to the United States by debtor countries was $ 12.3 billion (including principal and overdue interest), of which only $ 378 million related to unconsolidated debt.
As regards the financial situation of the states and local governments, it can be said that the increase in expenses (almost quadrupled from 1913 to 1929), although naturally connected with the inflationary consequences of the war and with the economic and social development of the postwar period, is above all the result of the expansion of government activity, especially in the field of road and school construction. The states and local governments faced these higher expenses, in part with the higher revenues deriving from the continuous increase in national income (only the federal government in fact provided for a reduction in taxation in the years of prosperity in order to derive a constant income), partly with recourse to public debt. When the situation changed in 1929 and income began to decline, states and local governments found themselves in serious embarrassment. All the more so since the already impressive volume of public debt had undermined the confidence of investors in the ability of governments themselves to provide for its service and therefore greatly diminished the possibility of resorting to it.
It would take too long to give an overview of the finances of individual states or local authorities and it is also difficult to summarize the situation as a whole, since the figures published are not all updated on the same date. As a general indication, we can say that in the financial year 1931-32 the revenues of the states and local authorities were respectively 2,207.9 and 6,644.0 million dollars, and the expenses of 2,505.8 and 7,056.7 ; and that the public debt as of June 30, 1932 had reached the figures of 2,373.6 and 15,215.8 million dollars respectively for the states and local authorities.