- 1). Analyze the state's statutory tax code by separating taxes into those that are to be earmarked to a special revenue fund and those that are to be paid into the state's general fund. Create a separate tax category for those taxes that require a certain portion of the taxes collected to be deposited into a special revenue fund with the remainder of the tax paid into the general fund. For instance, a state might impose a sales tax of 7 percent and require that 1 percent of the tax be earmarked to a special business development fund and the remainder be paid into the general fund.
- 2). Allocate the earmarked taxes collected into their appropriate statutory special revenue fund. For instance, the New Jersey gross income tax requires that all state gross income taxes be paid into the state's Property Tax Relief Fund for the purpose of reducing or offsetting property taxes.
- 3). Allocate all other taxes not earmarked by state statute into the state's general fund. The general fund consists of all revenues that are not earmarked by state statue or by the state's constitution. For instance, the New Jersey corporation business tax is partially earmarked with the remainder of the tax proceeds allocated to the general fund.
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