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1974 Memorandum on Allocation of the Federal Tax Burden and Federal Grants-in-Aid by State [1] (1974)

handle is hein.tera/mallocbufe0014 and id is 1 raw text is: MEMORANDUM ON THE ALLOCATION OF THE FEDERAL TAX BURDEN AND FEDERAL GRANTS-IN-AID BY STATE Fiscal Year 1974 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 (excluding trust fund taxes)and total taxes (including trust funds), as estimated for fiscal 1974, is given in Table 1. The total tax burden is consistent with the official unified budget concept introduced with the 1969 Budget. 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 eleven years. However, certain changes in the bases of allocation of certain taxes limits the comparability of current estimates and those of prior years: a) Substitution of total property income for dividend income in allocating one-half the corporation income tax (1966). b) Elimination of personal income as base for allocating excise tax or, alcoholic beverages, i.e., use of consumption data alone to allocate this tax (1972). c) State unemployment taxes deposited with the Treasury now included in the total tax burden (1969). d) Taxes earmarked for the Airport and Airway Trust Fund, established in 1971, are now included in the total Federal tax burden rather than the Federal Funds estimates in other excises and customs (1972). One purpose for which the Federal tax burden estimates can be used is demonstrated in Tables 2 and 3. Table 2 shows the tax cost of all Federal grants- in-aid to state and local governments, including payments financed through trust funds and excluding shared revenues, $42,843.3 million in fiscal year 1973. Table 3 shows the tax cost of Federal grants, excluding those which are made through trust funds, $37,464.4 million in fiscal year 1973. Since fiscal year 1973 is the first year that general revenue sharing is in effect, a separate table, Table 4, shows tax cost by state of the $6,633.6 million of revenue sharing grants disbursed in fiscal year 1973. It must be borne in mind that these comparisons of Federal tax burdens for aid payments per $1.00 of assistance do not actually indicate the entire costs which state and local governments incur for obtaining Federal grants. The comparisons, with few exceptions, do not take into account the costs to these governments of administering the programs for which the aid is granted, nor the amounts of matching funds which the state and local governments must make available out of their own revenue in order to qualify as recipients of these grants. In the last few years, these matching funds have been approximately 10 percent of state and local general revenues from their own sources; or approximately $12 billion in fiscal 1971. Further explanation of the formula -- its derivation, 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., February 5, 1974