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1983 Memorandum on Allocation of the Federal Tax Burden and Federal Grants-in-Aid by State 1 (1983)

handle is hein.tera/mallocbufe0023 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 1982* 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 1982 is given in Table 1. The total tax burden is consis- tent with the official unified budget concept introduced with the 1969 Budget. 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 20 years. However, certain changes in the bases of allocation for certain taxes limit 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 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 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 for 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 but excluding shared revenues (e.g., payments in lieu of taxes on Fed- eral lands in certain states), $85,494.2 million in fiscal year 1982. Table 3 shows the tax cost by state of the $4,568.6 million of general revenue sharing grants disbursed in fiscal year 1982. 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 ad- ministering 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 fiscal year 1982, it is estimated that state and local governments provided approximately $1.00 of matching funds for $2.22 of Federal aid. The 1982 comparison of Federal tax burdens versus grants-in-aid is not strictly comparable to estimates for prior years because of refinements in compu- tational procedures. 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 Metropolitan Areas, April 1974 (price $1.50). Tax Foundation, Incorporated 1875 Connecticut Avenue, N.W. Washington, D.C. 20009 April 1983 *Supersedes Memorandum designated Fiscal Year 1982 published in April 1982.