Description: The sales and use tax is the state’s second largest revenue source as well as a major funding source for cities, counties, and some special districts. Historically, consumers have spent about the same share of their income each year on taxable items, meaning that sales taxes generally kept pace with growth in the state's economy. Starting in 1980, however, California consumers began to spend a growing share of their income each year on nontaxable items, especially services, and a declining share of their income on taxable goods. Although total consumer spending kept pace with the state’s economy, this shift in spending caused growth in taxable sales to lag behind growth in the state’s economy. Correspondingly, total sales tax revenues for the state and local governments have grown somewhat slower than the state's economy since 1980, despite periodic increases in the tax rate.