With the suggested modifications, the faller plan appear for merk the objections that are raised against the alternáty zad umstances, it has far more appeal than 4 further pochutirm in H em. Taxes, or it may be coupled with a malleg podur bird. Hoan Flervise be warranted; it would be biely to meet neerksmentsin, **olring attention than those that might be met through inleges mase in Faterai expenditures; and if done, and under broa Ritage of xoansion of the stready oweoldy by whore of 1 FEDERAL-STATE REVENUE SHARING* BY RICHARD C. WORSNOP Plans to distribute a fixed percentage of Federal income tax revenue among the States, if and when the Federal budget again produces an annual surplus, may be expected to attract growing attention as State and local revenue needs continue to mount. The current estimate is that annual State and local government expenditures will climb within a decade to $120 billion-about $40 billion more than now. To meet such huge outlays, States and localities will require additional sources of revenue, but new tax sources have virtually disappeared and existing taxes are already burdensome. Access to a share of the Federal Government's tax receipts, therefore, would be a godsend. The revenue-sharing proposal that has been under discussion_recently would supplement existing large Federal aid programs but would d. fer from them in providing for distribution of funds with few or no strings attached. The plan was first advanced 412 years ago by Walter W. Heller, who recently resigned as Chairman of the President's Council of Economic Advisers. When Heller, then chairman of the University of Minnesota's Economics Department, snggested in a speech on June 6, 1900, that an agreed share of Federal Income tax receipts be diverted to the States, the proposal drow little notice; the country was in a recession and no surplus of Federal revenues was in sight. Since then, the economie picture has considerably brightened. Although Federal expenditures still exceed Federal receipts, econotale experts foresee a budgetary surplus within 2 years if tax receipts continue to rise at the present rate of around $6 billion a year and if spending is held down. In essence, the Heller revenue-sharing proposal is a scheme to ward of recurrent Federal budget surpluses, Heller rejects the theory, often volved by conservative economist and Members of Congress, that all ex ess Federal revenue should be applied to reduction of the national debt. He contends that prolonged piling up of surpluses would produce fiscal drg; the K, it would retard growth of the economy in the absence of full e ployment. A report by a presidential Study groep, sy'nitted in mid-November, showed how the Heer plan might be put into effect. The report was ret made public, but it was believed to make four principal revan. *Reprinted from Flitemel Rewerà R ports, vol. 2. Dee 3 164. tmo de tales cuin ed in each state was headed by Joseph A. Pecimin, director of epimis at the ALLOCATION AND USE OF THE SHARED TAX REVENUE Discussion of revenue sharing is centered largely on questions relating to allocation and use of the funds to be distributed. The report submitted to the White House last month was said to recommend that two-thirds of the shared tax revenues be distributed on a per capita basis, and that the remaining one-third go to about a dozen States in especially difficult financial circumstances. This formula would doubtless encounter opposition in Congress. At present, the District of Columbia and each of 34 States receives a percentage share of total Federal grants-in-aid that is larger than its proportionate contribution to total Federal taxes collected. For example, Alaska gets about 48 cents in grants for every dollar of taxes its people pay to the Federal Government; New Jersey, in contrast, gets back only 5 cents for every tax dollar. Although a State's needs might be generally accepted as one factor to be taken into consideration in allocating shared revenue, Members of Congress from the wealthier States probably would not welcome any appreciable widening of the current gap between what their constituents pay in taxes and what they receive in Federal grants. Objection might be raised also to distributing Federal funds to the States with no check on how they would be expended. Persons favoring tight Federal supervision over the use of shared revenue tend to distrust State authorities. Without Federal control, the argument goes, some States might spend the money on segregated public housing or on construction of expressways not in conformity with the Federal interstate highway plan. Moreover, fear has been expressed that tax sharing might tend to undermine existing Federal-State programs for health, welfare, and education. To meet these objections, the Federal Government might ban expenditure of shared revenue for such projects as highways but require that it be put to use in certain broa-l areas of general need. Many leading economists, including Heller, feel that more trust should be placed in State governments. Much of the shared revenue, they assert, would be spent for education, which already consumes more than one-half of the State and local tax dollar. In that case, the deadlock over Federal aid to education might finally be broken. Th States and localities would be able to pay for as well as supervise public education, and perhaps extend aid to church-related schools in add:tion. Even if States should use shared revenue to reduce State tax, the consumer would benefit by a lightening of the burden of such regressive imposts as levies on sales and services. PROPOSAL FOR STATE CONCESSION ON TAX-FREE BONDS J. A. Livingston, syndicated business columnist, asserted last November 25 that tax sharing should not be all give on the part of the Federal Government and all take on the part of State governments, • Before World War II, when Federal taxes were much lower a few Stites got back dollar amourts more than all the Federal taxes they paid. Ratios of grants distribu excess of taxes paid ringed in 1920 from 119 percent in Montana up to 319 per Wyoming. A tible showing taxes paid and Federal aid received in each State in 19. be found in "Federal Subsidies to the States, ERR, 1931, vol 1, p 13 |