ABSTRACT
Introduction States face two basic choices in creating their revenue systems. The first is the extent to which the cost of government will be paid primarily by direct consumers of government services rather than being distributed generally through the tax system. If direct consumers pay, the state sells services and the tax system is not used to finance the service. A pricing system must be developed so that users pay and nonusers do not. This requires there to be identifiable direct customers and no substantial external beneficiaries from the service being provided. Many state services cannot be effectively or efficiently financed with charges, but many can.
