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33 Tax Foundation's Washington News 1 (1981)

handle is hein.tera/wingnews0035 and id is 1 raw text is: TAX FOUNDATION'S WASHINGTOON -1 June 8, 1981 Vol...L N . -.. SEVERANCE TAXES AND GRANT-IN-AID FORMULAS A key staff member of the influential Advisory Commission on Intergovernmental Relations recently proposed an adjustment in federal aid formulas to reduce assistance to those states which raise a significant amount of revenue through severance taxes on natural resources and to increase federal aid dollars to many states which do not levy severance taxes. The implementation of this proposal very likely could have the effect of federal aid dollars becoming an inducement for changes in state tax policy. The Proposal John Shannon, Assistant Director of the Advisory Commission on Intergovernmental Relations,* testified on May 13 before the Senate Intergovernmental Relations Subcommittee and advocated the replacement of the per capita income measure currently used as a formula factor representing a state's wealth in many federal to state grant programs with a measure he termed tax capacity. Mr. Shannon defined the tax capacity of a state and its local governments as: ...the amount of revenue they could raise (relative to other state-local governments) if all fifty state-local systems applied the identical tax rates (national averages) to their respective tax bases. Fiscal capacity is thus viewed as an attribute of government derived from the economic strength inherent within a state's jurisdictional boundaries. *The Advisory Commission in Intergovernmental Relations (ACIR) was created by federal statute in 1959 to study the federal system and offer recommendations for improvements. The Commission has 26 members who serve two-year terms. Nine commissioners are drawn from the federal government, fourteen are from state and local governments, and three commissioners are private citizens. Twenty commissioners are Presidential appointees, three Congressmen are appointed by the Speaker of the House, and three U.S. Senators are appointed by the President of the Senate. ACIR is a major source of research, data, and information on intergovernmental affairs and has been a key force in shaping policy.

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