State and local governments collect tax revenues from three primary sources: property taxes, sales taxes, and income taxes. Sales taxes make up the bulk of aggregate state tax revenue, while property taxes are the largest source of tax revenue for the nation's local governments. Over time these revenue streams have fluctuated somewhat, with most volatility coinciding with the 2001-2002 recession and the much larger 2008 Great Recession.

The second quarter of 2012 marked the 10th consecutive quarter of growth for state tax revenues. Despite this promising sign, however, the rates of growth have slowed from 10  percent and greater since mid-2011 to 3 percent in Q2 2012.