State and local tax performance in the United States and in the South and implications for the financing of public higher education are considered. It is suggested that despite apparent gains in state tax revenues, little overall growth in real terms has been experienced in the region and nation in recent years, nor can much be expected in the early 1980s. Additionally, statutory restraints and reductions in federal funding affect the adequacy of state and local sources of revenue. Public higher education in the Southern states, which in recent decades has fared above national averages in terms of state support, cannot be assured of drawing or increasing, or even continuing, shares of state tax revenues. Although measures imposing spending limitations or tax constraints have been voted down in many states, the number of states in which such measures have passed continues to grow. When utilization of tax ability is measured by comparison with average utilization by all states using a given tax, it is found that New England and the Middle Atlantic states generally continue to overutilize, while the North Central and the states comprising the Southern Regional Education Board underutilize. When increases in tax collections are adjusted for population growth and for inflation, the percent of real growth in state and local taxes increased less than 2 percent over the decade 1970-79. The use of selective sales taxes, general sales tax, property tax, corporation income tax, and personal income tax is examined. (SW)