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21 Tax Foundation's Tax Review 1 (1960)

handle is hein.tera/tafoutaxt0023 and id is 1 raw text is: TAX FOUNDATION'S 'ANUAoR /900, I'oI. XXI, No. / Allocating the Federal Tax Burden by State A Tax Foundation Staff Analysis H ow mucui of the Federal tax burden is borne by the people of each state'? Oflicial statistics do not provide an answer to this question. The Internal Revenue Service annually pub- lishes statistics showing the amount of Federal taxes collected in each state. These statistics are a by-product of the process of collection, but as tax burden among the states they have little validity. The place where taxes are collected is very often not the place (state) where the taxpayer lives who bears the burden of those taxes. This applies to major parts or all of the broad categorics of Federal taxes. rhlius collections data for manufacturers' excises reflect the location of the man- ufacturing firms rather than the consumers who presum- ably bear the burden of these taxes. In fiscal 1959, 97 per- cent of tobacco taxes was col- fo fulb of the lected in North Carolina, is i34W114' hv the l Kentucky and Virginia, but For yeltrs tfw proI clearly the burden of this II( indeuirt' of III tax is distributed among the troublesome olle. 'l states in accordance with the ncr glihiered is Very consumption of tobacco prod- s hre ucts. In fiscal 1958, 85 per- Iisean 1959, 97 Item cent of the excise taxes on W eed ill ins automobiles, trucks and parts producing states, lt was collected in Michigan, (istiilled l14331g stil but Michigan accounted for sti1113t14)I of to31t4e0 only 6 percent of new motor fit this Rvie'v.Tim vehicle registrations in 1957. it. formula for aIIom Over one - third of Federal iuiql dese4'flle 0 gasoline taxes is reported in New York because the head i an indication of the distribution of the Federal oflices of several large oil companies are located there. Because many national business firms have head oflices in New York fron which they pay the cor- poration income tax, an exceptionally large propor- tion of corporation tax collections (28 percent in fiscal 1959) is reported from that state in the oflicial collections data. Similarly, large corporations with nation-wide operations report withheld income taxes from their head offices. Trhis practice makes incomec tax lit riefcollections in New York State inrelatively large. ederal tax hu'den of vaeac hlilt4? These characteristics of ,aml of determining ollicial collections data also ation iats been a mean that collections for most pince where taxes of the western and mid-west- tien not the llince er states substantially under- axplyer lives Who state the amount of Federal 4For extmiiple, inl it of tflIseco taxes taxes borne by or that comes three lbig tobacco- from' the people of those the tax hurden4 is states. !s ne1'(3'Ering t) eon- rodiuels. These characteristics of of- 4n11(lationI explains ficial collections data show, ing theI lax hlaurdenl moreover, that they have no f III(f Iss of that validity as a basis for alloca- tion of Federal aid to the states-as in sore recent pro- Copyright 1960 by Tax Faution, Inc., 30 Rocke/eller Plaza, New York 20, N. Y. Material may be re-used with proper credit. 'I h. It LIt 131 F it 43 I

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