Tax Features Volume 23 Number 1 January 1979
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MONTHLY TAX FEATURES Volume 23, Number 1, January 1979 Towar d bette r government founded '977 Tax foundation. Inc. 1875 Connecticut Ave ., N .W . q Washington, D . C . 20009 q 202-328-4500 q Per Capita State and Local Taxe s WAS H MONT , .J (25) $821 $68 2 $766 $906 (37) S.O . $6/ 6 $639 WYO. (6 ) $62 9 (13) IOWA (26 ) MIC H ) $988 IDAHO (34 NEB . (23 ) $749 CALIF . (3) NEV . ( 1 0) UTA H (32) $774 N .J . (8) $93 1 COLD.(18) MO . OE L .(10) $820 $892 (43) MO - (11) $89 2 $652 KA5 .(27) $824 $60 1 $67 5 D .C . (4) $1,07 1 $1,089 $728 $609 (44) KY (29) VA ) (46) N ARIZ . ( N.MEX . (39 ) (45) OKLA . TENN .(47 .0 ARK . $564 S.C . (48) $59 3 $598 (51 ) $625 MISS . $494 (49) $549 $827 $609 135) TEXAS $527 LA . $507 (36 ) Number in parenthe- $637 $636 FLA . sis indicates standin g $2,296 (31 1 of states according t o burden of state an d ALASKA local tax (1) . Dollars equals per capita tax $974 o 0 oâ in fiscal year 1977 . HAWAII Cl Tax Foundation map . State and Local Taxes Exceed $200 Billion; Per Capita Collections Doubled Over Decade In fiscal 1978, tax payments to burdens over the last decade fo r income . Per capita taxes of $813 in state and local governments passe d which figures are available, 1967 to 1977 had risen 164 percent sinc e the $200 billion mark for the firs t 1977. During this period state-local 1967 . And, while 1977 taxe s time, after rising 10 percent over th e taxes rose 188 percent, population amounted to $128 per $1,000 of per- previous year and 188 percent over 19 percent, consumer prices 82 per- sonal income, Tax Foundation calls the decade, according to Ta x cent and personal income 137 per- attention to the fact that from every Foundation estimates . At $202 .6 cent . (Federal tax growth in the $1,000 of growth in personal incom e billion in 1978, state-local taxes decade, incidentally, was almost th e in the past decade, state and loca l were $18 billion higher than in 197 7 same — 136 percent —as the rise i n taxes claimed $145 . and $132 billion above their 1968 personal income .) There were wide variation s level. During the decade, state-local ta x among states in both the levels of While full data for 1978 are not payments grew 33 percent faste r state-local taxes and their respec- yet available, Tax Foundation re- than the combined increases in pop- tive trends over the decade . Per searchers offered several compara- ulation and prices, and 22 percent capita taxes more than doubled in tive measures of the growth in tax faster than the growth in personal (Continued on page 4) ATTENTION EDITORS: Monthly Tax Features is not copyrighted . Material may be reproduced freely . Please credit Tax Foundation . 1 Government Expenditures an d Governmen t Gross National Product Calendar Years 1960-197 8 Spending To Hit (Dollar Amounts in Billions) $700 Billion For Government expenditures a As a percentage of Calendar Year '7 8 Amount b gross national produc t Gros s national State State Federal, state and local govern- Year product Total Federal and local Total Federal and loca l ment spending was at a $694 billion 1960 $ 506 .0 $136 .4 $ 93 . 1 $ 43 .3 27 .0 18 .4 8 . 6 1961 523 .3 149 .1 101 . 9 47 .2 28 .5 19 .5 9 . 0 annual rate in the third quarter o f 1962 563 .8 160 .5 110 . 4 50 .1 28 .5 19 .6 8 . 9 1978, and will no doubt exceed a 1963 594 .7 167 .8 114 . 2 53 .6 28 .2 19 .2 9 . 0 1964 635 .7 176 .3 118 . 2 58 .1 27 .7 18 .6 9 . 1 $700 billion annual rate in the fourth 1965 688 .1 187 .8 123 . 8 64 .0 27 .3 18 .0 9 . 3 quarter, say Tax Foundation econo- 1966 753 .0 213 .6 143 . 6 70 .0 28 .4 19 .1 9 . 3 1967 796 .3 242 .4 163 . 7 78 .7 30 .4 20 .6 9 . 9 mists . Government spending in the 1968 868 .5 268 .9 180 . 6 88 .3 31 .0 20 .8 10 . 2 second quarter amounted to 32. 1 1969 935 .5 285 .6 188 .4 97 .2 30 .5 20 .1 10 . 4 percent of the Gross Nationa l 1970 982 .4 311 .9 204 .2 107 .7 31 .7 20 .8 11 .0 Product (GNP) of $2,088 billion. 1971 1,063 .4 340 .5 220 .6 119 .9 32 .0 20 .7 11 . 3 1972 1,171 .1 370 .9 244 .7 126 .2 31 .7 20 .9 10 . 8 Since 1971, GNP has climbed a t 1973 1,306 .6 404 .9 265 .0 139 .9 31 .0 20 .3 10 . 7 1974 1,412 .9 458 .2 299 .3 158 .9 32 .4 21 .2 11 . the rate of over $100 billion a year . 1,528 .8 532 .8 356 .8 176 .0 34 .8 23 .3 11 . 25 1975 At the same time, the ratio of govern- 1976 1,700 .1 570 .4 385 .2 185 .2 33 .6 22 .7 10 . 9 1977 1,887 .2 621 .8 422 .6 199 .2 33 .0 22 .4 10 . 6 ment expense has fluctuated from 32 1978 I 1,992 .0 659 .1 448 .8 210 .3 33 .1 22 .5 10 . 6 percent in 1971 to a high of almost 1978 II C 2,087 .5 670 .1 448 .3 221 .8 32 .1 21 .5 10 . 6 1978 I I I C 2,141 .1 693 .9 466 .1 227 .8 32 .4 21 .8 10 . 6 35 percent in 1975 . Government a Expenditures on income and product accounts . They are on an accrual basis, include trust accoun t spending has shown a slightl y transactions with the public, and exclude capital transactions that do not represent current produc- decreasing trend since then to it s tion . b Federal data include expenditures for grants-in-aid to state and local governments . These amounts present level of 32 .1 percent. c have been excluded from state and local expenditures to avoid duplication . Seasonally adjusted at annual rates . In 1975, as the accompanying Source : Department of Commerce, Bureau of Economic Analysis, and Tax Foundation computations . table shows, government expendi- tures at all levels were $533 billion, and GNP totaled $1,529 billion. In State Taxes Show Downturn, 1965, government spent $188 billion, 27.3 percent of that year's GNP o f 1978 Sales and Income Taxes $688 billion. Ten years earlier, in 1955, government spent $98 billion, or 24 .5 percent of that year's GNP . Most Commonly Reduce d The Federal government spend s For the first time in four years , $975 million in 1976, and $1 .6 billion over twice as much as states and 1978 state legislation on major in 1975. localities . According to the Ta x taxes resulted in more reduction s These reductions in state taxe s Foundation, in the latest period than increases, according to Ta x are in addition to the $7 billion cut in reported, Federal expenditure s Foundation researchers . Taxpayers California's local property taxes re- were at an annual rate of $466 in 21 states will pay about $2 .5 sulting from the Proposition 13 initi- billion, while state-local expendi- billion less each year, mostly ative and to widespread, though fo r tures totaled $228 billion. In the last through reductions in state sale s the most part undetermined , 1977 , full calendar year reported, and income taxes . Eight states, how- amounts of reductions in property Federal spending was equal to 22. 4 ever, increased taxes by about $200 tax burdens through legislativ e percent of GNP . Recognizing hig h million, mainly through boosts in th e action in several other states. Some government spending as a factor in levies on motor fuels . additional tax or expenditure re- inflation, the President has recently straints were approved by voters i n announced that the Administratio n The net result of these actions 13 states in November. Other limita- plans to reduce Federal spending to reduces state-level taxes an estima- tion proposals were rejected, wit h 21 percent of GNP by 1980, instead ted $2.3 billion annually below wha t voters choosing instead to limit th e of 1981 as earlier envisaged. they would have reached under pre- growth of taxes or expenditures The accompanying table provide s vious laws, say Foundation econo- rather than reduce taxes directly . data on trends in governmen t mists . By contrast, statutory in- Copies of "State Tax Action i n spending in relation to GNP from creases were enacted in the thre e 1978" are available free of charg e 1960 to date. previous years : $476 million in 1977, from the Foundation . 2 behalf of each worker earning the No End Is in Sight for Boosts maximum taxable income . Increases in social security taxe s In Taxes for Social Securit y above the levels previously in effec t were enacted by Congress in 1977 in order to shore up the financing o f While the 1978 social security tax By 1981, the maximum taxabl e the social security system . The 1977 hikes may have seemed high fo r base will rise to $29,700 due to legis- law had the effect of raising social some workers, 1979's bite will be lation already enacted .