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1978 Memorandum on Allocation of the Federal Tax Burden and Federal Grants-in-Aid by State 1 (1978)

handle is hein.tera/mallocbufe0018 and id is 1 raw text is: MEMORANDUM ON THE ALLOCATION OF THE FEDERAL TAX BURDEN AMD FEDERAL GRANTS-IN-AID BY STATE Fiscal Year 1978 Since Federal tax collections data (published by the Treasury Depart- ment) 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 1978 is given in Table 1. The total tax burden is consistent with the official unified tudget 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 fifteen years. However, certain changes in the bases of allocation of certain taxes limit the comparability of current esti- mates 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 the base for allocating excise tax on alcoholic beverages, i.e., use of consumption data alone to allocate this tax (1972). c) Inclusion of state unemployment taxes deposited with the Treasury included in the total tax burden (1969). d) Inclusion of taxes earmarked for the Airport and Airway Trust Fund, established in 1971, in the total Federal tax burden rather than in the Federal fund estimates fur other excises and customs (1972). One purpose for which the Federal tax burden estimates can be used is demonstrated in Tables 2, 3, 4, and 5. Table 2 shows the tax cost of all Federal grants-in-aid to state and local governments, including payments financed through trust funds but excluding shared revenues, $65,690.0 million in fiscal year 1977. Table 3 shows the tax cost of Federal grants, excluding those which are made through trust funds, $56,552.7 million in fiscal year 1977. Table 4 shows the tax cost by state of the $6,757.7 million of general revenue sharing grants disbursed in fiscal year 1977. Table 5 shows the tax cost by state of all general purpose fiscal aids, $8,730.8 million in fiscal year 1977. (All tables in this report exclude shared revenues, e.g., payments in lieu of taxes on Federal lands in certain states, but include general revenue sharing grants.) 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, it is estimated that state and local governments provided approximately $1.00 of matching funds for $3.00 of Federal aid. Further explanation of the formula -- its derivation, uses, and limitations -- is contained in Tax Foundation's Research Aid No. 5, Federal Tax Burdens in States and Metroplitan Areas, April 1974 (price $1.501. Tax Foundation, Inc. Room 1515, 50 Rockefeller Plaza March 1978 New York, N. Y. 10020