Federal Taxes

3 Key excerpts on "Federal Taxes"

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  eBook - ePub

  Nevada's Great Recession

  Looking Back, Moving Forward

  • Elliott Parker, Kate Marshall(Authors)
  • 2017(Publication Date)
  • University of Nevada Press

    (Publisher)

  CHAPTER 6

  Federal Fiscal Policy

  In 1790, the nation which had fought a revolution against taxation without representation discovered that some of its citizens weren’t much happier about taxation with representation.

  — LYNDON B. JOHNSON 1

  Introduction

  Many discussions about taxes begin with the assertion that they are rising out of control. In the past thirty-five years, the revenue collected by the U.S. government—federal, state, and local—has grown more than fivefold. Income taxes are the largest source of federal government revenues, followed by payroll taxes for social insurance programs. Corporate income taxes and other Federal Taxes make up a small share of total federal revenue, and federal revenue makes up the majority of all taxes paid to all levels of government. Figure 6.1 shows how much the federal government collects if we adjust for price inflation; since 1980 the total has grown by 166 percent.

  The problem with presenting these data in this way is that we fail to account for the gradual annual increase in the U.S. population, and for rising real incomes that affect how much federal, state, and local governments must pay to their employees to compete with the private sector. We can divide by GDP to get a more meaningful number, but this would make government revenue look relatively higher during recessions and lower during booms. To get a more stable ratio, we should divide by the economy’s estimated potential GDP , which is reported by the Federal Reserve Bank of St. Louis.2

  As a share of potential GDP , government receipts have been much more stable over the past three to four decades (figure 6.2

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  eBook - PDF

  Studies in State and Local Public Finance

  • Harvey S. Rosen(Author)
  • 2007(Publication Date)
  • University of Chicago Press

    (Publisher)

  In summary, this paper provides a wealth of new results on the nature of state income and sales taxes. Subject to the caveats noted above, this information will be very useful to practitioners in state and local public finance. In addition to the specific questions cited above, the data accumulated suggest an important possibility for incidence theory. To the extent that the Feenberg and Rosen analysis indicates increased interstate tax competition (through lower income elasticities or perhaps through increases in an “interstate tax competition” summary measure as described above), it suggests that incidence theories that rely on implicit collusive exploitation of capital through widespread use of 185 State Personal Income and Sales Taxes corporate taxes or industrial property taxes must take such competitive behavior into account. Reference Gold, S. D. 1983. Recent developments in state finances. National Tax Journal 36, no. 1 : 1-29. This Page Intentionally Left Blank 7 Education, Welfare and the “New” Federalism: State Budgeting in a Federalist Public Economy Steven G. Craig and Robert P. Inman 7.1 Introduction The United States public economy is a federalist economy. Public services are financed and purchased by federal, state, and local gov- ernments each with autonomous decision-making authority, but each intimately connected to the others through an elaborate network of grants-in-aid and regulations. Historically, it has been an evolving struc- ture marked by significant shifts in responsibilities and control. I Most recently the trend in financial responsibility has been upward, toward the federal level, while the state-local sector has become the primary provider of (nondefense) public services.* The decade 1965-75, called the period of “creative federalism,” marked a significant acceleration in those trends. During this period the number of federal grants to the state-local sector went from 160 separate aid programs in 1965 to 412 by 1976.

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  State and Local Politics

  Institutions and Reform

  • Todd Donovan, Daniel Smith, Tracy Osborn, Christopher Mooney(Authors)
  • 2020(Publication Date)
  • Cengage Learning EMEA

    (Publisher)

  74 One overview of these studies concluded that most found “a weak or insignificant relationship between taxes and economic performance” because they failed to account for what taxes were spent on. Taxes dedicated to health, education, and highways were found to have a positive effect on private invest-ment and employment in a state, but welfare spend-ing had a negative effect. The authors concluded that their findings should not be interpreted as a prescription for curtailing welfare spending. They noted, rather, that states face a “vicious cycle” in a prolonged economic slump. They risk crowding out public investment in health, education, streets, and highways if they increase welfare spending alone, but raising taxes to fund public investment and wel-fare may further depress the economy. 75 Trends in State and Local Revenues Governments have grown in size since the 1950s. With this growth and with changes in the economy, the mix of revenues that now fund state governments has changed. Federal revenues sent to the states increased sharply from 1955 through 1975 and now play a larger role in state budgets than they did 60 years ago. Then, states collected almost two-thirds of their revenue via selective sales taxes, general sales taxes, and license taxes. As the scope of government grew, states came to rely less on selective sales taxes and license taxes and now rely more heavily on income taxes, general sales taxes, and charges and fees (tuition). Although states have increased their reliance on federal funds, income taxes, and fees, a much smaller proportion of state revenues is now generated by selective sales taxes on gasoline. 76 Where Does the Money Go? Government Spending Discussing state and local revenue sources before examining what government spends the money on is a bit like putting the cart before the horse.

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