The income tax is considered a major source of funding for which level of government?

The income tax serves as a significant source of revenue for both state and federal governments, making the selection of "both state and federal governments" the correct answer.

At the federal level, income tax is one of the largest sources of revenue, enabling the federal government to fund various programs and services, including social security, national defense, and infrastructure. This taxation system is progressive, meaning that individuals with higher incomes pay a larger percentage, which helps to redistribute wealth and support government initiatives.

State governments also heavily rely on income tax as a primary source of funding. Many states impose their own income taxes in addition to the federal income tax, using the funds to support education, healthcare, public safety, and other essential services. Each state has the authority to set its income tax rates and structures, resulting in varying approaches to taxation across the country.

In contrast, local governments generally do not rely as heavily on income tax, often depending more on property taxes, sales taxes, and various fees for their funding. Hence, the significant role of income tax at both the state and federal levels underscores why "both state and federal governments" is the most accurate answer.