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1968 Memorandum on Allocation of the Federal Tax Burden and Federal Grants-in-Aid by State [1] (1968)

handle is hein.tera/mallocbufe0008 and id is 1 raw text is: MEMORANDUM ON ALLOCATION OF THE FEDERAL TAX BURDEN AND FEDERAL GRANTS IN AID BY STATE Since Federal tax collections data (published by the Treasury Department) do not accurately reflect the tax burden by state, Tax Foundation, in cooperation with other organizations, has developed a special allocation formula to distri- bute the Federal tax burden by state. This distribution of the Federal budget tax burden excluding trust fund taxes, as estimated for fiscal 1968,is given in Table 1. Tax Foundation has gone a step further in the formula derivation to in- clude trust fund tax receipts in order to distribute the total Federal tax burden by state. The estimates for fiscal 1968 are set forth in Table 2. This table excludes certain items, chiefly state unemployment insurance taxes, which for the first time have been included in budget receipts in the U.S. Budget for 1969. The bases used for estimating tax burdens appear in Schedule A. Essen- tially the same method and bases have been used for the derivation of these estimates for the past six years. However, in 1966 a change was made in one base for allocating the corporation income tax burden; it was a statistical revision which limits the comparability of current estimates and those for prior years. Previously, one half of the corporation tax burden was allocated in pro- portion to the distribution of dividends by state. For current estimates, total property income (see Survey of Current Business, August 1966, pp. 14-16) was substituted for dividends in this portion of the allocation. One purpose for which the Federal budget tax burden estimates can be used is demonstrated in Table 3, which shows the tax cost of Federal budget grants (financed through general fund taxes) to state and local governments. Table 4 shows the tax cost of total Federal grants to state and local governments -- that is, including payments financed through trust funds as well as through the general fund. It must be borne in mind that these comparisons of Federal assistance which each state receives per $1.00 of its estimated Federal tax burden for aid payments do not actually indicate the entire cost which the states incur for obtaining Federal grants. These comparisons, with a few exception, do not take into account the costs to the states of administering the programs for which the aid is granted, nor the amounts of matching funds which the states must make available out of their own revenues in order to qualify as recipients of these grants. Further explanation of the formulas -- their derivations, uses, and limi- tations -- is contained in Tax Foundation's Research Aid No. 3 (Revised), Alloca- ting the Federal Tax Burden by State, December 1963. Tax Foundation, Inc. March 1968