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1969 Memorandum on Allocation of the Federal Tax Burden and Federal Grants-in-Aid by State [1] (1969)

handle is hein.tera/mallocbufe0009 and id is 1 raw text is: THE TAX FOUNDATION V111 INCORPOR.ATED 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 coopera- tion with other organizations, has developed a special allocation formula to distribute the Federal tax burden by state. This distribution of the total Federal budget tax burden (including trust fund taxes), as estimated for fiscal 1969, is given in Table 1. (This table is consistent with the new unified official budget concept introduced with the 1969 Budget presentation.) The distribution of the Federal funds tax burden (excluding trust fund taxes) is given in Table 2. The bases used for estimating tax burdens appear in Schedule A. Essential- ly 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 proportion to the distribution of dividends by state. Since 1966, total property income (See Survey of Current Business, August 1968 pp.16-19) has been substituted for dividends in this portion of the allocation. Another change has been made in the 1969 estimates, when for the first time state unemployment insurance taxes are included in the total tax burden (Table 1). This change was made to conform with the new unified budget concept in which deposits of state unemployment insurance taxes in the unemployment trust fund are classified as part of total budget receipts. One purpose for which the Federal tax burden estimates can be used is demonstrated in Tables 3 and 4. Table 3 shows the tax cost of all Federal grants-in-aid to state and local governments, including payments financed through trust funds. Table 4 shows the tax cost of Federal grants, excluding those which are made through trust funds. It must be borne in mind that these comparisons of Federal assistance 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. The comparisons, with a few exceptions, 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 iwnich 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 limitations,--is contained in Tax Foundation's Research Aid No. 3 (Revised), Allocating the Federal Tax Burden by State, December 1963. Tax Foundation, Inc. April, 1969