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1970 Memorandum on Allocation of the Federal Tax Burden and Federal Grants-in-Aid by State [1] (1970)

handle is hein.tera/mallocbufe0010 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 distribute the Federal tax burden by state. This distribution of the Federal tax burden, both Federal funds (exclud- ing trust fund taxes) and total taxes (including trust funds), as estimated for fiscal 1970, is given in Table 1. The total tax burden is consistent with the official unified official budget concept introduced with the 1969 Budget presentation. The bases used for estimating tax burdens appear in Schedule A. Essentially the same method and bases have been used for the derivation of these estimates for the past seven 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 income tax burden was allocated in proportion to the distribution of dividends by state. Since 1966, total 'property income (see Survey of Current Business, August 1969, pp. 16-19), has been substituted for dividends in this portion of the allocation. The underlying theory is that all forms of income from property--rents, interest, and dividends--are affected by the imposition of the corporate income tax. 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 which the states must make available out of their own revenue 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. May 13, 1970