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GGD-83-106 1 (1983-09-09)

handle is hein.gao/gaobabefd0001 and id is 1 raw text is: BY THE US GENERAL ACCOUNTING OFFICE Report To The Honorable Lloyd Bentsen United States Senate Information Regarding The Effect Of Applying The Representative Tax System To The General Revenue Sharing, Medicaid, And Vocational Education Programs The Representative Tax System (RTS) is a statistical indicator of States' potential ability to raise tax revenues for the support of public services. This method of measuring States' revenue raising abilities was developed by the Advisory Commission on Intergov- ernmental Relations. In the past, GAO has concluded that the RTS is a better measure of States' revenue raising potential than personal income (the most commonly used measure). GAO was asked to determine the likely impact of replacing personal income with the RTS on the distribution of Federal aid among the states in three formula based programs: General Revenue Sharing, Medicaid, and Vocational Education. GAO found that, if replacing personal income with the RTS were the only change made, Federal funds would be redistributed away from States with relatively large non-income revenue sources such as energy production and retail sales. However, this outcome would likely not occur because the rationale for using the RTS would probably support additional formula changes as well. When additional formula changes were considered, no general pattern of winners and losers emerged. This was because the distribu- tional outcome is sensitive to which program was being consid- ered and to precisely what other formula changes would likely be made in conjunction with substituting the RTS for personal income. III 111l ii 122343 z W aw GAO/GGD-83-106 ( . us SEPTEMBER 9, 1983 ), ;&' I I ,

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