limiting factor in determining the size of a budget in the public sector is the capacity to tax or generate revenue. To compute fiscal capacity, a representative tax system should assess the level of personal income, the value of retail sales, and the value of property. However, there are other areas that governments should focus on when striving to ensure and maintain revenue generation. Diversifying a revenue portfolio is paramount, especially when the economy takes a downturn. The following essay evaluates whether evaluate whether, Swobodaville, a hypothetical city has an adequately diverse tax mix, and recommends possible actions to improve its tax base.

The city Swobodaville is compared to 'Comparator'. Swobodaville has a significantly higher personal income than comparators, although its corporate income is slightly lower. For some unknown reason, the sales tax that Swobodaville has to pay is significantly lower than comparators as is its property tax. On the...
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