The Problem of Redistribution of Federal and State Funds

Abstract

During the last 10 years "the crisis" in state and local finance has received an increasing amount of attention. Academic and political authorities point out that the expenditures of state and local governments are rising at an annual average rate of 13 percent while revenues have kept pace only through the widespread adoption of ne~"taxes and higher rates on existing taxes. They also state that the Federal Government is a very efficient tax collector, that the existing federal tax structure has a mildly progressive impact and brings in increasing amounts of revenue each year, while the tax structure at the state and local level is substantially regressive and inelastic. Most supporters of Federal action favor either block grants to the states and localities or Federal revenue sharing with the states with no strings attached. State governments, in turn, knowing the particular problems of their areas, would use the transferred funds for high priority needs. Advocates of such Federal programs believe they would strengthen the weakened position of state and local governments by providing funds for their most needed expenditures and, at the same time, partially displace regressive taxes. Although we agree with most of these statements, we believe that the supporters of unconditional grants and/or revenue sharing are much too enthusiastic. We fear that most such programs as presently proposed would not solve the real crisis problems of state and local finance. The logic of our paper is presented in four separate steps.

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Cite this paper

@inproceedings{Weiss2008ThePO, title={The Problem of Redistribution of Federal and State Funds}, author={Steven J. Weiss and ROBERT W. EISENMENGER}, year={2008} }