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9 The Tax Review 1 (1948)

handle is hein.tera/tafoutaxt0011 and id is 1 raw text is: January, 1948 VOLUME IX No. 1 THE TAX REVIEW Copyright, 1948, by Tax Foundation, New York, N. Y. HOME REVENUE FOR HOME RULE By JO BINGHAM Research Senior, Tax Foundalion N THE patchwork of intergovernmental tax relations, the sources of municipal revenue are comparatively weak. Experts who have explored the possibilities of strengthen- ing them in order to release the heavy pressures on the property tax or to enhance local support of local functions, have generally agreed that an independent source of mu- nicipal revenue should be found. The reports of two select committees on intergovernmental fiscal relations' have both suggested a certain separation of tax sources, with greater independence of local sources, but beyond making recommendations regarding exclusive use of the property tax, neither specified the separate tax source which was to come to the aid of the cities. It is the purpose of this article to suggest an exclusive local levy, one that is pro- ductive but comparatively painless. This source comprises the amusement taxes in general, but specifically the admis- sions tax. In critical treatment of intergovernmental tax relations and by advocates of tax reform, the latter has received only incidental notice, but, for reasons to be developed here, it deserves reappraisal and emphasis. The subject of tax revenue allocation among the federal, state and local levels of government has been a thorn pressing deeper and deeper into the body politic as the overall tax burden increased. Federal and state govern- ments, with superior powers, have annexed the most productive revenue sources, leaving to localities, by com- parison, only scraps from the fiscal table. Here is a picture of the major revenue sources for 1946: 1 Committee on Intergovernmental Fiscal Relations, Federal, State and Local Governmental Fiscal Relations. 78th Congress, Ist Session, Document No. 69, 1943. Joint Committee of the American Bar Association, the National Tax Association, and the National Association of Tax Adminis- trators, The Coordination of Federal, State ana Local Taxation, 1947. TAX REVENUE IN FISCAL 1946, (In Millions) Taxes Federal State Local Individual Income ...............................$18,705 $ 389 $ 33 Corporation ............................................... ..... 12,554 442 5 D eath & G ift ...................................................... 677 146 1 P roperty ................................................................. 253 4,904 Sales, Excises; Federal Customs 6,884 2,826 167 Licenses, Perm its ................................................ 601 924 171 Total Taxes ................................$39,420 $4,980 $5,281 . Excludes social security payroll taxes. Source: Bureau of the Census, Governmental Revenue in 1946. This table clearly reveals the concentration of revenue sources at the different levels of government. At the federal level it is the income taxes, individual and cor- porate. These together accounted for almost 80% of the 1946 federal taxes, 48% from the individual income tax alone. The major state source is the sales, gross receipts or use type of tax, which produced 57% of state tax revenue in 1946. Local revenue is derived almost totally from the property tax. This produced 80% of all local revenue in 1946-counties, cities, and school district- and 93% of their tax revenue. For cities alone, here is the story2. Property taxes alone produced $2,162 million in 1946, which was 86% of total municipal tax revenue. The next most productive tax source of the cities as a whole is the sales tax. Al- though only 78 cities levy such taxes, they produced $165 million in 1946, or almost 7o of total city tax revenues. Licenses, permits and like taxes amounted to $145 mil- lion. Almost negligible in the total is the remaining $39 million, $33 of which represents income taxes collected by St. Louis, Toledo and Philadelphia. Obviously, the mainstay of municipal support is the property tax. 2 Source cited in above table. 1

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