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25 Tax Foundation's Tax Review 1 (1964)

handle is hein.tera/tafoutaxt0027 and id is 1 raw text is: TAX FOU N DAT IO N'S JANUARY 1964, Vol. XXV, No. I ~ ~ __7_ State-Local Finances: Recurring Crisis or Gradual Evolution By C. Lowell Harriss Economic Consultant, Tax Foundation, Inc. R EDUCTION in Federal tax rates now seems certain. No one, however, talks seriously about cuts in state-local tax rates. Any discussion is likely to be about which tax rates are to be raised, by how much, and whether new revenue sources are required. Higher state-local tax rates lie ahead for most of us. This prospect grows out of another-rising state-local expenditure. Are we building up to a crisis or can we expect the gradual adjustment which can be taken in stride? Crises in state-local finance are in the making but not a single, great, nationwide crisis.' For if one thing is true about state and local governments it is that they differ. Not all, by any means, will face financial strains. The bad troubles will not all hit in the same year or biennium. Yet most of us must expect that the communities and states in which we live will try to increase spending more rapidly than the existing revenue systems will support. The post-war period has This Iss brought crises in state-local According to on finance. They have been met, government spend even though not always so nearly twice the well as we might like. More fessor Harriss in tl or less gradually, the public rise seems ligl has coped with conflicts be- sugg sto fsu mae uspidly tand tween its desires for more public services and its lack He says that dec of enthusiasm for higher and not as a prac control over the taxes. The results-in ex- those leading to growth, make cos The Tax Foundation has in pro- local spedingti cess a study of the outlook forH se th state-local finances. Although are outside our drawing upon the work accom- sense even these p plished to date, these comments control. We do h should not be interpreted as either how fully and how a preview or a summary of the to deal with them, Tax Foundation study because neither is possible at this time. penditures, taxation, and borrowing-have been impressive. State-local revenue systems as they now stand ivill yield enough to pay for a lot of additional state- local service as the economy grows-but less than the public will want. Gaps must be expected. Filling them will strain both patience and pocketbooks. Recent National Planning Association projec- tions put state-local spending in 1976 at about $142 billion (1962 dollars )2 . This would be nearly twice the In Brief 1963 total and a per capita increase approaching 80 per- jection, state-local cent, an expansion of nearly by 1976 will be total, notes Pro- viewv. To him, this of GNP. Any such rise in probable yet the 13 years seems to me highly th, lie says, must 1, 19illionale (196 dollasrTis ' The estimates appear in Pro- jections to the Years 1976 and 2000: Economic Growth Popula- tion, Labor Force and Leisure, and Transportation, Report #23 to the Outdoor Recreation Re- sources Review Commission (Washington, 1962). The origi- nal estimates are in 1959 dollars. The rise in prices paid by state- local governments from 1959 to 1962 is reported at approximately 10 percent, and that figure has been used in converting NPA es- timates for 1959 into 1962 dollars. Copyright 1964 by Tax Foundation, Inc., 50 Rockefeller Plaza, New York, N.Y. 10020. Material may be re-used with proper credit. 1 ue e pro ing 1963 is Re y im grow .1. in . isions made in the past tical matter within our next few years, i.e., continued population tly increases in state- evitable. He says that se forces in one sense control, in a realistic ressures are subject to ave some choice about efficiently we shall try he declares.

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