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MISCELLANEOUS STATISTICAL STUDIES OP
FEDERAL, STATE, AND LOCAL FISCAL STRUCTURES

Several s t a t i s t i c a l tables have been drawn up as a basis f o r
further stucfcr o f governmental f i s c a l structures.

A few explanatory notes

are attached to the tables.
Tables 1 and 2 present expenditures and revenues of the Federal,
State and l o c a l governments f o r the f i s p a l years ending i n 1938, the
l a t e s t period for which actual or r e l i a b l y estimated amounts of expenditures
and revenues for a l l levels of Government are a v a i l a b l e .
Tables 3 to 9 present Federal and State grants for c e r t a i n
selected years end local shares of State taxes.




Tables 10, 11, and 12 are concerned with State property taxation.

Table 1
FEDERAL, STATE, AMD ESTIMATED LOCAL GENERAL GOVERNMENT EXPEIIDITURES FOR THE YEAR 1938
(in millions of dollars)
E x p e n d i t u r e s f r o m own sources

l/

Intergovernmsital transfers

Expenditures

2/

Total Federal to
State 5 /

Federal
4/
N a t i o n a l defense
P o l i c e and other p r o t e c t i o n
Highways and s t r e e t s
A g r i c u l t u r e and n a t i o n a l
resources
7/
Education
~
H e a l t h and h o s p i t a l s
R e l i e f , W e l f a r e , aid
social security
Net a d d i t i o n s t o s o c i a l
security reserves
8/
Interest
A l l other
9/
Total expenditure

for

own functions.

Function
State

1,610
44
260

10
202
905

566
510

1,620
812
1,675

1,000
177
36

74
897
271

3
1,418
265

1,077
2,492
572

23
33
15

2,182 .

775

266'

3,223

489
926
902

500
124
390

—

7,626

4,148

5

/

Local
6/

Federal to
Local 6 /

State i o
Local 5 /

Local to
State
5/

24

572
850

1,620
812
1*675

8.9
4;5
9.2

977
42
21

96
248
279

4
2,202
272

1,077
2,492
572

5.9
13.7
3.2

1,919

703

601

3,223

17.8

449
926
840

540
124
236

—

592
2,217

989
1,642
3,293

5.5
9.1
18.2

6,827

3,258

7,310

17,395

96.0

65

135

529

729

4.0

6,892

3,393

7,839

18,124

100.0

1

—

263

—

346

11

40

—

—

—

592
2,001

989
1,642
3,293

—

—

16

46

184

5,621

17,395

627

172

1,543

—

Per c e n t

Total

26

6
317

—

102

3/

12
196
824

1
682
7

—

Local

1,608
44
1

mm mm

235

State

14

2
—

Federal

*mmm

*

Debt r e t i r e m e n t ]£)/
T o t a l disbursement
Per cent of t o t a l
disbursement

Footnotes on n e x t p a g e .




65
7,691

135£/
4,283
•

42.5

23.6

529

729

6,150

18,124

•

33.9

—

—

627

172

1,543

26

•

•

100.0

38.0

18.7

43.3

100.0

Footnotes t o T a b l e 1
l/
2/
3f
4/
hj

6/
7/
8/

9/
10/

Excludes e x p e n d i t u r e s f r o m t r a n s f e r s r e c e i v e d f r o m a n o t h e r j u r i s d i c t i o n .
Does n o t i n c l u d e
of p u b l i c - s e r v i c e e n t e r p r i s e s .
Includes grants and shared taxes and comprises p a r t o f "Expenditures from own sources 11 »

expaiditures

I n c l u d e s e x p e n d i t u r e s f r o m own sources and f r o m 11 I n t e r g o v e r n m e n t a l t r a n s f e r s 1 1 r e c e i v e d , b u t excludes
t r a n s f e r s t o other j u r i s d i c t i o n s .
Annual Report o f t h e S e c r e t a r y o f t h e T r e a s u r y , 1 9 3 8 . F e d e r a l f i g u r e s r e p r e s e n t e x p e n d i t u r e s o f t h e
f i s c a l y e a r a i d i n g June 5 0 , 1 9 3 8 .
U n i t e d S t a t e s Bureau o f t h e Census, " F i n a n c i a l S t a t i s t i c s o f S t a t e s , 1 9 3 8 n . S t a t e f i g u r e s r e p r e s e n t e x p e n d i t u r e s of -the f i s c a l year e n d i n g on December 3 1 , 1 9 3 8 , or t h e l a t e s t complete f i s c a l y e a r c l o s i n g on a d a t e
prior thereto.
The f i s c a l yoars i n t h i s r e p o r t ondod on June 3 0 , % 1 9 3 8 i n 37 s t a t e s ;
on December 3 1 , 1938
i n 4 s t a t e s ; on September 3 0 , 1938 i n 3 s t a t e s ; and on March 3 1 , May 30^ August 3 1 , and October 3 1 , 1938 i n
4 states.
B u l l e t i n of t h e ( F e d e r a l ) T r e a s u r y Department, A u g u s t , 1 9 3 9 , p . 4 .
I n c l u d e s such items as f l o o d c o n t r o l , r e c l a m a t i o n , r i v e r and h a r b o r improvement, and Panama C a n a l e x p e n d i t u r e s .
S o c i a l s e c u r i t y r e s e r v e s l o s s w i t h d r a w a l s ( i n m i l l i o n s ) o f 85 f o r t h e f e d e r a l government and 202 f o r t h e s t a t e s .
These w i U i d r a w a l s a r o i n c l u d e d i n " R e l i e f , w e l f a r e , and s o c i a l s o c u r i t y " above. I n t e r e s t on i n v e s t e d s o c i a l
security reserves i s included i n "Interest11 below.
Includes pension payments t o p u b l i c employees and s u r v i v o r s .
Not t h e p r i n c i p a l v a l u e of bonds c a n c e l e d or redeemed b u t t h e b u d g e t a r y payments i n t o s i n k i n g funds and f o r
r e t i r e m e n t s o f s e r i a l bonds and notes w i t h a m a t u r i t y i n excess o f one y e a r .




Tabic 3
FEDERAL GRAMS TO STATE AND LOCAL GOVERNMENTS
( I n M i l l i o n s of
F i s c a l Year
1902
1910
1912
1915
1919
1920
1925
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940

Education^/
3;0
3;3
4;0
4;4
8;1
10;9
16 ; 0
18;7
21;1
22;6
24;3
24;9
24;5
23 ;2
26;7
35 ; 8
37;5
49 ;4
50;9
51.9

Highways 3 /
— -

Dollars)
Other £ /

Welfare 1 /
——

—
—

- - -

— ^

85 ; 9
62 ;5
95 ;8
80 ;8
82 ; 1
75 ;9
153; 7
186 ;3
172 ; 1
221;7
JS74;7
224.1
340.7
247.0
191 ;6
164.5

- - -

;5
2;3
l;5
l;6
1;4
;7
;9
2;3
316 ;9
743; 7
1,892;7
721 ; 0
412; 7
451; 7
712; 4
621.8

l/

•

;1
;l
;l
;4
1;0
l;2
l;4
1;8
1;8
2;5
2i7
3;3
4;2
4;4
6;0
7;5
7.1

_(ln Per C e n t )
Total
3;0
3;3
4;0
4;5
94 ;6
75 ;8
113; 7
102 ; 1
105; 8
100 ;6
180;7
215.3
516 ; 0
991 ;3
2,197;4
985 ; 1
795.3
754 ; 1
962; 4
845.3

y

Education
100 ; 0
100 ; 0
100 ; 0
97;7
8;5
14 ;4
14;1
18 ;3
20;0
22 ;5
13 ;4
1 1 ;5
4;7
2.3
i;2
3;6
4;7
6;6
5.2
6.1

Highways

Welfare

Other

——

—i -

2
90;9
82 ;5
84;2
79 ;2
77;6
75 ;6
85 ;2
86*6
33 ;4
22 ;5
12 ;5
22.8
42.9
32.8
20;0
19.5

;5
S;0
1;3 •
1;5
1;3
;6
;5
1;1
61.5
75 ; 0
86 ;2
73.2
5 1 ;9
59 ;9
74.1
73.6

1
1
1

Total
109.0
100.0
100 ; 0
100.0
100.0
100.0
100.0
100.0
100 ;0
100.0
100 ; 0
100.0
100;0
100.0
100.0
100 ; 0
100 ; 0
100 ; 0
100 ; 0
100.0

l / H . J * 3 i t t e r m a n n , " S t a t e and F e d e r a l G r a n t s - I n - A i d M , p p . 1 3 2 - 1 3 5 , Annual Reports of t h e S e c r e t a r y o f t h e T r e a s u r y , and i n t e r v i e w s w i t h s e v e r a l f e d e r a l a g e n c i e s .
2 / A g r i c u l t u r a l experiment s t a t i o n s , a g r i c u l t u r a l e x t e n s i o n w o r k , s t a t e marine s c h o o l s , c o l l e g e s f o r a g r i c u l t u r e and mechanic a r t s , and c o o p e r a t i v e v o c a t i o n a l
education and r e h a b i l i t a t i o n .
3 / F e d e r a l a i d highways and emergency highway w o r k .
4 / F e d e r a l Emergency R e l i e f A d m i n i s t r a t i o n (FERA), P u b l i c Yforks A d m i n i s t r a t i o n (PWA), S o c i a l S e c u r i t y A c t , and P u b l i c H e a l t h S e r v i c e .
5 / F o r e s t f u n d s , w i l d l i f e r e s t o r a t i o n , s t a t e and t e r r i t o r i a l homes f o r d i s a b l e d s o l d i e r s and s a i l o r s , and U n i t e d S t a t e s employment s e r v i c e .
1?/ Excludes payments t o s t a t e and l o c a l governments i n l i e u o f t a x e s , e t c . ( c e r t a i n payments from t h e n a t i o n a l f o r e s t f u n d , under M i n e r a l L e a s i n g A c t , under
Grazing A c t of June 2 8 , 1 9 3 4 , s a l e s of Coos Bay wagon-road lands and t i m b e r , t o c o u n t i e s on Oregon and C a l i f o r n i a g r a n t l a n d s , of o i l , gas, and potash d e p o s i t
r o y a l t i e s and r e n t a l s , under F e d e r a l Yfater Power A c t , and under Tennessee V a l l e y ' A u t h o r i t y A c t ) amounting ( i n m i l l i o n s of d o l l a r s ) so f a r as r e c e n t y e a r s a r e
concerned t o 2 . 1 i n 1 9 3 3 , 2 . 2 i n 1934, 2 . 3 i n 1935,
2 . 7 i n 1 9 3 6 , 2 . 9 i n 1937, 3 . 7 i n 1938, 4 . 5 i n 1939, and 4 . 3 i n 1940. Also excludes payments f o r t h e
N a t i o n a l Guard, which a r e n o t r e c e i v e d by s t a t e and l o c a l governments, amounting a n n u a l l y ( i n m i l l i o n s o f d o l l a r s ) t o from 25 t o 30 i n t h e l a t e t w e n t i e s
- and e a r l y t h i r t i e s , 3 3 . 2 i n 1933, 2 1 . 1 i n 1934, 2 2 . 3 i n 1935, 2 9 . 3 i n 1 9 3 6 , 3 6 . 5 i n 1 9 3 7 , 3 8 . 8 i n 1938, 4 2 . 5 i n 1 9 3 9 , and 7 1 . 0 i n 1 9 4 0 .




Table 4 '
FEDERAL WELFARE GRANTS TO STATE AND LOCAL GOVERNMENTS 1 /
( I n millions of dollars)

F i s c a l Year
1919
1920
1925
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940

Direct Relief
(FBRA) 2 /

Public Works
(FWA) 2 /

,

Social Security
Act
—

— -

—
,
—

Other 4 /
;5
2.3
1.5
•1.6
1.4

—

-

316.5
740.5
1,857.5
476.5
1,7
#5

1.8
34.4
205 a
244.2
176.2
390.4
269.1

.
—

—
—

—.
,«
34.4
166.8
275.0
322.0
348.5

;9
2.3

*

1,4
.8
5.0

-

4.2

Total
;5
2.3
1;5
1»6
1.4
.7
.9
2.3
316.9
743.7
1,892.7
721.0
412.7
451.7
712.4
621.8

1/

Same sources as Table 3 .

2/

Most of the f e d e r a l r e l i e f funds involved here merely passed through the s t a t e
t r e a s u r i e s on t h e i r way t o municipal and county r e l i e f budgets supplemented
w i t h a d d i t i o n a l r e l i e f funds granted by the s t a t e s . The s t a t e s , however,
f u n c t i o n i n g p r i n c i p a l l y as coordinating agencies f o r l o c a l work, a l l o c a t e d
these f e d e r a l funds along w i t h t h e i r own among t h e i r l o c a l u n i t s .

2/

I n c l u s i v e o f p u b l i c works grants d i r e c t l y from the f e d e r a l government t o l o c a l
governments. Such d i r e c t dealings w i t h l o c a l u n i t s without using the states
as intermediaries i s an innovation i n the f i e l d o f f e d e r a l grants.

y

Mostly p u b l i c h e a l t h .




- 19-

REPLACEMENT OF THE GENERAL PROPERTY TAX WITH THE
GENERAL SALES TAX IN CERTAIN STATES
An important phenomenon o f recent years has been the replacement o f
general p r o p e r t y t a x a t i o n w i t h general s a l e s t a x a t i o n i n s e v e r a l s t a t e and
l o c a l t a x systems. The need f o r r e p l a c i n g the p r o p e r t y t a x i n some p a r t a t
l e a s t has been one o f the arguments advanced i n f a v o r o f s t a t e taxes o f v a r i o u s
s o r t s on income, i n h e r i t a n c e s , e t c , I n general, the d i s a p p o i n t i n g y i e l d s ( f a r
s h o r t o f y i e l d s a n t i c i p a t e d b^ those advancing t h i s argument) have r e s u l t e d i n
these sources o f revenue becoming i n each case 11 j u s t another tax 11 . However,
i t seems t h a t the s u b s t a n t i a l y i e l d s o f general sales t a x a t i o n t o g e t h e r w i t h
the adoption o f severe p r o p e r t y t a x l i m i t a t i o n s s h o r t l y before o r a t t h e same
time as t h e enactment o f sales t a x laws have a t l a s t enabled some s t a t e s t o
more o r l e s s ^ t u r n the t r i c k 1 1 . As t o whether o r n o t t h i s i s a d e s i r a b l e development i s another q u e s t i o n , and one which r e q u i r e s much f u r t h e r study.
As i n d i c a t e d i n Tables 10 and 11, per c a p i t a p r o p e r t y t a x l e v i e s
( c o l l e c t i o n s i n the case o f C a l i f o r n i a ) i n the f o u r s t a t e s w i t h sales taxes
d e c l i n e d sharply between 1930 and 1935 w i t h the adoption o f general sales
taxes i n 1933 and 1934, The per c a p i t a p r o p e r t y t a x c o l l e c t i o n s and l e v i e s
i n two o f these s t a t e s f o r 1939 and the p r o p e r t y t a x l e v i e s i n the o t h e r two
f o r 1938 i n d i c a t e t h a t I l l i n o i s , Michigan, and Ohio have succeeded i n r e t a i n i n g almost a l l the gain and C a l i f o r n i a has succeeded i n r e t a i n i n g most o f i t .
The r i s e o f n e a r l y nine d o l l a r s i n per c a p i t a p r o p e r t y t a x c o l l e c t i o n s i n
C a l i f o r n i a between 1935 and 1939 might i n p a r t be accounted f o r by t h e f a c t
t h a t the p r o p e r t i e s of the v a r i o u s p u b l i c u t i l i t i e s , which f o r many years
had been s u b j e c t e x c l u s i v e l y t o s t a t e gross r e c e i p t s taxes, were r e s t o r e d i n
1935 t o the l o c a l governments 1 t a x r o l l s and made s u b j e c t t o l o c a l p r o p e r t y
tax levies.
I n c o n t r a s t , as a l s o i n d i c a t e d i n Tables 10 and 11, per c a p i t a
p r o p e r t y t a x l e v i e s i n the f o u r s t a t e s w i t h o u t sales taxes remained i n the
neighborhood o f the 1930 l e v e l s , e s p e c i a l l y i n Massachusetts and New York..
However, a n o t i c o a b l e decrease took place i n Minnesota a f t e r 1930, and a
s u b s t a n t i a l decrease took place i n Wisconsin between 1930 and 1934* f o l l o w e d
by an i n c r e a s e . I n t h e T h i r t i e s , these s t a t e s r e s o r t e d t o increases i n t h e i r
taxes on incomes, i n h e r i t a n c e s , and o t h e r e s t a b l i s h e d sources i n t h e i r search
f o r more revenues. New York, however, passed an enabling a c t , . p e r m i t t i n g i t s
l e a d i n g c i t y t o impose a r e t a i l sales t a x and several o t h e r taxes t o provide
f o r i t s r e l i e f f i n a n c i n g . A Z p e r cent r e t a i l sales t a x has been imposed i n
New Yoric C i t y since December, 1934 which has a n n u a l l y brought i n more revenue
than the general sales taxes o f many o f the 22 s t a t e s now r e s o r t i n g t o such
t a x a t i o n . I t i s s i g n i f i c a n t t o note t h a t . a l l o f t h e f o u r s t a t e s w i t h o u t genera l sales taxes and o n l y one ( C a l i f o r n i a ) o f t h e f o u r s t a t e s w i t h such taxes i n
the t a b l e s have r e s o r t e d t o taxes on i n d i v i d u a l and corporate incomes f There
are no income taxes i n I l l i n o i s , Michigan, and Ohio.
The sales t a x has enabled a number o f s t a t e s t o abandon p r o p e r t y t a x
l e v i e s f o r s t a t e purposes and t o impose o r continue i n e f f e c t s o - c a l l e d o v e r a l l l i m i t a t i o n s on t h e p r o p e r t y t a x r a t e s o f t h e i r l o c a l u n i t s f
California
has not imposed a s t a t e l e v y on p r o p e r t y f o r many years — i n f a c t f o r many




- 20years p r i o r t o the adoption of the sales t a x t h e r e f No state l e v y on property
has been imposed i n I l l i n o i s and Ohio since 1932 and i n Michigan since 1935.
On the other hand, New York and Wisconsin w i t h o u t sales taxes have f o r many
years l e v i e d only a very small or nominal state property t a x f o r p a r t i c u l a r
purposes. I t seems t h a t , of the states dispensing w i t h s t a t e property t a x
l e v i e s or l e v y i n g f o r state purposes a t low rates, about as many have general
sales taxes as have n o t . I n some, however, l i k e I l l i n o i s , Michigan, and Ohio,
the connection between the abandonment of the s t a t e l e v y and the adoption of
general sales taxes i s q u i t e c l e a r . Michigan since 1932 and Ohio since 1911
have been among the s t a t e s , now 9 i n a l l , which have o v e r a l l l i m i t a t i o n s a t a
c e r t a i n rate i n each s t a t e on the combined property taxes of l o c a l governments.
Of t h i s group o f states a l l b u t two have state-wide general sales taxes on
r e t a i l sales o r a s t i l l broader base covering other businesses as w e l l as
r e t a i l e r s . These blanket l i m i t a t i o n s are i n most cases embedded i n s t a t e con*s t i t u t i o n s , and, w i t h one exception, have !lescape clauses 11 p r o v i d i n g f o r i n creases above the s p e c i f i e d r a t e i n each case by a c t i o n o f the l o c a l e l e c t o r a t e .
Such l i m i t a t i o n s were adopted by one s t a t e i n 1933, by 4 states i n 1932, and
by .the other 4 states i n t h i s group a t various pre-depression dates.
In
Michigan the o v e r a l l l i m i t i s 15 m i l l s or 1% per cent and i n Ohio i t i s 10
m i l l s or 1 per cent f o r a l l l o c a l governments combined on any property holding.
I n c i d e n t a l l y , the y i e l d s o f the general sales taxes i n the various
s t a t e s , e s p e c i a l l y i n those w i t h the top rate so f a r as r e t a i l sales are concerned (3 per c e n t ) , have proven t o be q u i t e s u b s t a n t i a l . The y i e l d s of the
3 per cent r e t a i l sales t a x and the accompanying use t a x f o r the f i s c a l year
ending June 30, 1940 were $93,696,229 i n C a l i f o r n i a , $90,818,210 i n I l l i n o i s ,
$53,174,914 i n Michigan, and f o r the f i s c a l year ending December 31, 1938 was
$46,104,998 i n Ohio. The r e s o r t t o such a l u c r a t i v e source of revenue has been
q u i t e d e f i n i t e l y an important f a c t o r i n accounting f o r not only the decline i n
the r e l a t i v e importance of the property t a x among the various taxes, b u t , so
f a r as some states and t h e i r l o c a l governments are concerned, the absolute dec l i n e i n the y i e l d of the property t a x as w e l l .
The break down i n the general property t a x w i t h respect t o i n t a n g i b l e
p r o p e r t y , r e s u l t i n g i n widespread escape o f almost a l l of i t and i n the l e g a l
r e c o g n i t i o n of t h i s evasion through the enactment of laws imposing comparatively
low rates on such property i n many s t a t e s and o u t r i g h t exemption i n others, i s
f a m i l i a r t o a l l who are i n t e r e s t e d i n t a x a t i o n . A s i m i l a r development t o a
somewhat l e s s e r extent has taken place r e c e n t l y w i t h respect t o tangible p e r sonal p r o p e r t y . Of t h e aggregate l e v i e s i n 1938 and 1939 on r e a l estate and
t a n g i b l e personal p r o p e r t y , as presented i n the t a b l e s , f o r Ohio, Massachusetts,
and Minnesota, reed estate accounted f o r 80.9 per cent, 91^8 per cent and 85.2
per cent r e s p e c t i v e l y and tangible personal property accounted f o r the r e s t f
Hence the property t a x i n the various states i s becoming a t a x on r e a l e s t a t e ,
which i t has been i n New York since 1932 and Delaware since 1939.




- 21 I n c i d e n t a l l y , one must be cautious i n a r r i v i n g a t conclusions based
on comparisons of per capita property tax l e v i e s between the various states
f o r any of the three years, as presented i n t h e tables, because property tax
bases are not uniform between the various states. To a small extent the
l e v i e s i n C a l i f o r n i a , I l l i n o i s , and Michigan consist of l e v i e s on intangibles
and those f o r New York do not include tangible .personal property.
Furthermore,
there are other d i f f e r e n c e s . For example, railroads are not included i n
Minnesota where they and c e r t a i n public u t i l i t i e s are subject to state gross
receipts taxes, but they are included i n I l l i n o i s , However, the data are
comparable w i t h i n each of the various states between the three selected years,
as the property t a x base f o r the three years i s uniform i n each case. The
data has been so compared i n the discussion above.
The data i n Table 12 on tax revenues collected by the various
governments reveal tho decline i n the r e l a t i v e importance of the property
tax among a l l taxes, combined state and l o c a l taxes, and state taxes.
It
i s i n t e r e s t i n g t o note t h a t the decline has been substantial during the l a s t
decade. I n 1938 the property t a x accounted f o r only 5 , 4 per cent of s t a t e
tax revenues and continued from pre-World War times to account f o r over 90
per cent of the t a x revenues collected by l o c a l governments. I t w i l l also
be noted t h a t very recently there are indications of a decline i n the absolute
y i e l d of the property t a x .




Table 10
TOTAL AND PER CAPITA STATE AND LOCAL GENERAL PROPERTY TAX LEVIES POR SELECTED YEARS
IN CERTAIN STATES WITH AND CERTAIN STATES WITHOUT GENERAL SALES TAXES l /
State
Calif.

Illinois

Mich.

Ohio

Mass.

Minn.

New
York

Wisconsin

1220

Collections
Population
Per c a p i t a
collections

$343,357,709
5,677,251

Levies
Population
Per c a p i t a
levies

$427,081,600
7,630,654

Levies
Population
Per c a p i t a
levies

0266,777,083
4,842,325

Levies
Population
Per c a p i t a
levies

$242,361,000(1931)
6,698,193(1931)

Levies
Population
Per c a p i t a
levies

$216,019,763
4,249,614

Levies
Population
Per c a p i t a
levies

§122,186,000

Levies
Population
Per c a p i t a
levies

$798,433,351

Levies
Population
Per c a p i t a
levies

$122,253,862
2,939,006

160.48

155,97

$55.09

$36.18(1931)

$50.83
2,563,953
$47.66

12,588,066
$63.43

$41.60

1225_

- 2222

$229,703,905
6,332,495

$307,600,917
. 6,811,265
$45.16

$36.33
1297,453,700
7,782,193

$330,861,500
7,872,783

$38.22

3% on r e t a £
sales (2$
enacted i n
1933 and .
3% i n 1935)
3% on r e t a i
sales cnact
i n 1933

$42.03
$166,453,000(1938) % on r e t a i
5,056,3130-9360 sales enact
i n 1933
$32.92(1938)

$147,498,199
4,713,811
$31.29

$168,872,000

$173,685,000(1938)^ on r e t a i :
6,853,397(1938)sales enact«
i n 1934
$25.34(1938)

6,793,787

$24.86
$226,071,382
4,347,654

Sales Tax

$230,676,760(1938) None
4,328,117(1938)

$52.00
$110,768,445
2,687,835

$41.21
$757,564,824
13,075,339
$57,94

$53.30 (1938)
$112,173,909
2,773,601
$40.44
$823,890,845
13,404,710

None

$61.46

$ 90,269,379(1934)$110,834,995
3,028,092(1934)
3,120,924
$29.81 (1934)

None

None

$35.51

1 / The data f o r general p r o p e r t y t a x l e v i e s were obtained from v a r i o u s s t a t e r e p o r t s
and p u b l i c a t i o n s i n the l i b r a x y o f the D i v i s i o n o f S t a t e and L o c a l Government i n
the U n i t e d States Bureau of the Census, The l e v i e s are amounts imposed on r e a l
e s t a t e and t a n g i b l e personal p r o p e r t y except i n New York where o n l y r e a l e s t a t e
i s taxed and except i n C a l i f o r n i a , I l l i n o i s , and Michigan where some l e v i e s on
i n t a n g i b l e s , which account f o r a v e r y s m a l l p a r t o f the t o t a l i n each case, are
i n c l u d e d . I l l i n o i s t r e a t s i n t a n g i b l e s l i k e t a n g i b l e pro re r t y . C a l i f o r n i a and
Michigan t a x them a t comparatively low r a t e s liice Ohio and Minnesota, b u t u n f o r t u n a t e l y the l e v i e s on them i n these two states were not r e p o r t e d separately
so t h a t they could be e l i m i n a t e d as was done f o r Ohio and Minnesota.
Intangibles
are exempt i n Massachusetts, New York, and Wisconsin. The data on p o p u l a t i o n are
census populations as o f A p r i l 7 , 1930 and estimated populations As o f J u l y 1 f o r
o t h e r years as presented i n release Series P - 3 , No. 10 o f t h e U.S.Bureau o f Census.



Table 10
r»EBR CAPITA. STATE AND LOCAL GENERAL PROPERTY TAX LEVIES POR
SELECTED YEARS IN CERTAIN STATES WITH AND CERTAIN STATES WITHOUT
GENERAL SALES TAXES 1 /

State

1930

1225

1932

(With a % r e t a i l sales t a x )
California
(collections)

$60.48

$36.33

145.16

Illinois

55.97

38.22

42.03

Michigan

55.09

31.29

32,92 (1938)

Ohio

36.18 (1931)

24.86

25.34 (1938)

(Without a general sales t a x )
Massachusetts

50.83

52.00

53.30 (1938)

Minnesota

47.66

41.21

40.44

New York

63.43

57.94

61.46

Wisconsin

41.60

29.81 (1934)

35.51

1/




From Table 10

Tabic 12
THE DECLIKE I N THE IMPORTANCE OP THE PROPERTY TiX
(In millions of dollars)

State
1926
1931
1938

$376
371
209

Property Tax
Local
$4,134
4,805
4,175

Total Federal
State & Looal Taxes

Total
$4,510
5,176
4,384

Total State and Local Taxes
State and Looal Property Tax
Percentage of Property Tax t o Total
Taxes

l/

Porcont of Total Property Tax
t o T o t a l Taxos

$8,605
9,300
14,347

1913
$17537
1,317

52.4
55.7
30.6

1922
$47315"
3,285

*

1938
$8,313
4,384

1930
$577^7
5,027

*

82.5

81.8

74.0

52.7

1913
$140

Peroent
46.7

1922
$348

Percent
40.6

1930
$345

160
$3b0

53 ;3
160.6

510
$8S6

59;4
106.0

1,435

80 ;6
100.0

3,644
03,853

94 ;6
100.0

Local: Property Tax 01,177

90.7

$2,937

93.0

04,682

93.3

$4,175

93.6

9;3
100.0

221
$S,lS8

7i0
100.0

335
§5,017

6;7
100.0

285
$4,460

6i4
100.0

S t a t e : Property Tax
A l l Other Taxes

A l l Other Taxes

120

$1,297

l/

Percent
19*4

1938
§209

Percent
5.4

The data f o r years other than 1938 are from various
studies of the National Industrie! Conference Board
under the t i t l e "Cost o f Government i n the Tftiited States". The data for 1938 are from Table 2 .




Table 5
RATIO OF FEDERAL GRANTS TO FEDERAL TAX REVENUES AND EXPENDITURES
Grants
t o ExExpenditures J /
Grants 2 /
Ratio o f
f i s c a l Tax Revenues 1 /
Year ( I n m i l l i o n s o f $) ( I n m i l l i o n s o f $) ( I n m i l l i o n s o f $) Tax Revenue penditure
1902
1910
1912
1915
1919
1920
1925
1928
1929
1930
1931
1932
1933
1934
1935
1936
19;7
1938
1939
1940

526
624
633
627
4,024
5,722
3,138
3,360
3,540
3,626
2,807
1,889
1,855
2,954
3,620
3,900
5,084
6,034
5,480
5,657

471
660
655
732
18,952
6,142
3,531
3,645
3,848
3,994
4,091
4,948
4,325
6,371
7,583
9,069
8,546
7,692
9,269
9,665

3.0
3.3
4.0
4;5
94.6
75.8
113.7
102.1
105.8
100.6
180.7
215.3
516.0
991.3
2,197.4
985.1
795.3
754.1
962; 4
845.3

1/

Annual Reports o f t h e Secretary of the Treasury.

2/

From Table 3 .




.5
.6
.7
2.4
lf3
3;6
3.0
3.0
2;8
6.4
11.4
27.8
33.6
60.7
25.3
15.6
12.5
17.6
14.9

.6
.5
.6
.6
.4
1.2
3.2
2.8
2.7
2.5
4.4
4.4
11.9
15.6
29.0
10,9
9,3
9.8
10.4
8.7

Table 6
STATE GRANTS TO LOCAL GOVERNMENTS 1 /
( I n millions of dollars)

Year

Education

1902
1912
1925
1928
1932
1933
1934
1935
1937
1938

45.4
82,1
254.1
323.1
397.4
368.8
446,3
521.8
599.5
642.5

Highways

1/

63.1
42.1
63.0
51.5
51.2
57.5
75.9
75.5

Welfare

2/
3.9
10.3
42.1
110;1 3 /
159.8 y
178.7 %]
222.0
349.3

Other
12.9
4.5
19.5
6.9
16.2
16.6
16.5
15.1
3.2
6.9

Total
58.3
86.6
340.6
381.4
518.7
565.0
673.8
773.1
900.6
1,074.2

1 / For years other than 1937 and 1938, Twentieth Century Fund, I n c . , "Facing the
Tax Problem11, p . 579 (Mabel Newcomer^ compilations). For 1937, United States
Bureau o f the Census, " F i n a n c i a l S t a t i s t i c s of States, 1937", p . 73. Grants
from s p e c i f i e d sources are not separated from other grants i n the census 1937
r e p o r t . From the grants were deducted grants from s p e c i f i e d sources f o r 1938,
as presented i n the census 1938 r e p o r t on s t a t e s , on the assumption t h a t they
were the same i n 1937. This deduction was necessary to make the f i g u r e s f o r
1937 comparable w i t h those of the previous years. For 1938, United States
Bureau of the Census, " F i n a n c i a l S t a t i s t i c s o f States, 1938", p . 97. Exclusive
o f grants from s p e c i f i e d sources as defined by the census b u t considered here as
shared taxes and hence excluded from the t a b l e . A grant i s defined here as a
payment from an unspecified source—general funds, e t c . (Mabel Newcomer1 s use o f
the t e i m ) .
2 / Data f o r separate c l a s s i f i c a t i o n not a v a i l a b l e .

Included i n "Other".

2 / Exclusive o f l a r g e p o r t i o n s o f the f e d e r a l d i r e c t r e l i e f grants t o the s t a t e s
(FERA) as presented i n Table 4. Most o f these f e d e r a l r e l i e f funds (FERA)
merely passed through the s t a t e t r e a s u r i e s on t h e i r way t o municipal and county
r e l i e f budgets w i t h a d d i t i o n a l r e l i e f funds granted by the s t a t e s . Mabel
Newcomer estimates, on the basis o f f i n a n c i a l r e p o r t s o f i n d i v i d u a l s t a t e s ,
t h a t l o c a l governments received f o r r e l i e f fxom the f e d e r a l government through
the s t a t e s , i n a d d i t i o n t o the s t a t e grants above, 52 m i l l i o n d o l l a r s i n 1933,
1,384 m i l l i o n d o l l a r s i n 1934 and 1,577 m i l l i o n d o l l a r s i n 1935, The amount
f o r 1934 appears t o be i n e r r o r since i t i s n e a r l y twice the amount of f e d e r a l
r e l i e f grants f o r t h a t year presented i n Table 4 and more than the amount of
a l l f e d e r a l grants f o r t h a t year presented i n Table 3. These amounts i n Tables
3 and 4 are reported by the United States Treasury f i n c i d e n t a l l y , 37 o f the
states have a f i s c a l year ending on <June 30 l i k e the f e d e r a l government.




Table 7
LOCAL SHARES OF STATE TAXES 1 /
( I n m i l l i o n s of dollars)
Tax

1902

1925

1928

1932

1933

1.2

59.8

57.5

32.7

27.1

28.9

31.0

40.0

6.4

13.3

37.4

62.0

33.9

28,0

24.7

28.3

)54.6
44.7 )

.2

.5

3.4

4.6

3.1

2.6

2.6

2.6

M

2/

.9

58.2

67.0

52.6

61.5

61.9

70.4

74.3

42.4

28.9

64.2

113.4

118.5

Income
Corporation
Death
Motor Vehicle
Motor f u e l

— ~

General sales
Liquor

1937 1938

1912

10.9

Other

14*2

— ,

—
,
—

1935, 1936

)
68.9

• >

59; 5

110.7 111.3 128.9 203.7 190.8
3.6

9.7

79.0

31.0

36.2

2.5

26.4

33.7

37.3

28.9

27.9

5.0

5.8

—

—

—

2,2

17.5

1934

7,5

11.9

4.2

4.5

32.3

195.2

267.2

239.9

244.7

22.5 107.82/ g4£

263.7 292.8 430.1 468.4 468,5

1 / For years other than 1937 and 1938, Twentieth Century Fund, I n c . , "Facing the Tax
Problem11, p . 578 (Mabel Newcomer1 s compilations). For 1937, United States Bureau
of the Census, " F i n a n c i a l S t a t i s t i c s of States 1937", p . 49* Grants firm s p e c i f i e
sources are not separated from other grants i n the census 1937 report. To the
l o c a l shares of s t a t e taxes were added grants from s p e c i f i e d sources f o r 1938, as
presented i n t h e census 1938 report on s t a t e s , on the assumption t h a t they were
the same i n 1937. This a d d i t i o n was necessary t o make the f i g u r e s f o r 1937 com-;
parable w i t h those o f the previous years. For 1938, United States Bureau o f the
Census, " F i n a n c i a l S t a t i s t i c s o f States, 1938", p . 97. I n c l u s i v e o f grants from
s p e c i f i e d sources as defined by the census and considered here as shared taxes ano
hence included i n the t a b l e . A shared tax i s defined here as a payment from a .
s p e c i f i e d source — gasoline t a x , income t a x , e t c . (Mabel Newcomer's d e f i n i t i o n ) .
2 / Data f o r separate c l a s s i f i c a t i o n not a v a i l a b l e .

Included i n

f,

Other , f .

2 / Includes 17.4 m i l l i o n d o l l a r s from a l c o h o l i c beverage l i c e n s e taxes and 45.5 .
m i l l i o n d o l l a r s from general property taxes
y

Includes 22.1 m i l l i o n d o l l a r s from a l c o h o l i c l i c e n s e beverage taxes and 24,5
m i l l i o n d o l l a r s from general property taxes.




Table 8
STATE GRANTS AND SHARES OF STATE TAXES TO LOCAL GOVERNMENTS 1 /
( I n millions of dollars)

Purposes

1937

1938

Education

642.6

682.4

Highways

302.0

317.4

Welfare

222.8

352.7

Other

201.1

190.2

1,368.5

1,542.7

Total

1/

United States Bureau of the Census, " F i n a n c i a l S t a t i s t i c s of States, 1937 M ,
p . 73, and " F i n a n c i a l S t a t i s t i c s o f States, 1938", p . 84.




Table 10
RATIO OF STATE GRANTS AND LOCAL SHARES OF STATE
TAXES TO STATE TAX REVENUES

Year

1902
1912
1915
1928
1932
1933
1934
1935
1937
1938

State Tax Revenues
( I n m i l l i o n s o f $)
172
333
1,303
1,774
1,882
1,750
1,996
2,293
3,369
3,853

1/

Grants and
Local shares 2 /
75.8
118.9
535.8
648.6
758.6
809.7
937.5
1,065.9
1,368.5
1,542.7

Per cent

2/

44.1
35.7
41.1
36.6
40.3
46.3
47.0
46.5
40.6
40.0

1 / For years other than 1937 and 1938, Twentieth Century Fund, I n c , ,
"Facing the Tax Problem1*, p . 576 (Mabel Newcomer1 s compilations).
For 1937 and 1938, United States Bureau o f the Census " F i n a n c i a l
S t a t i s t i c s of States,1937", pp. 42 and 49 and " F i n a n c i a l S t a t i s t i c s
o f States/ 1 1938, pp. 44 and 63.
2 / Fran Tables 6 and 7 .
As reported i n the census 1938 report on S t a t e s gross c o l l e c t i o n s
o f the States ( t a x revenues, non-tax revenues such as Federal grants,
e t c . , but not borrowings) i n 1938 were 4,939 f 9 m i l l i o n d o l l a r s . Of
t h i s amount 653*9 m i l l i o n d o l l a r s , or 13*2 per cent consisted of
Federal grants and l o c a l grants t o the States. State grants and
shares of State taxes t o l o c a l governments i n 1938 were. 1,542.7
m i l l i o n d o l l a r s , or 31.2 per cent of t h i s amount. I n other words,
the States received n e a r l y one-eighth of t h e i r gross c o l l e c t i o n s
from other governments and paid out almost o n e - t h i r d o f t h e i r gross
c o l l e c t i o n s or w e l l over twice t h a t amount t o t h e i r l o c a l u n i t s (see
the census 1938 r e p o r t on States, pp. 51-52).




Table 2
FEDERAL, STATE, AND LOCAL TAX REVENUES FOR THE YEAR 1938
(in millions of dollars)

Typo o f Tax

Federal y
Amount
j Per cent

Personal
I n d i v i d u a l Income
I n h e r i t a n c e , E s t a t e , and G i f t
Poll

1,703
1,286
417

Business
Corporate Income
Severance and S p e c i a l
Lie ens o
Miscellaneous ( c a p i t a l stoclc,
security transfer, e t c . )

1,536
1,336

28;2
21 ;3
6.9

25 ;5
22.2
—

12

0.2

2/
Stato
Amount
Por cent

Local 3 /
Amount | Per c e n t

357
209
142
6

9;3
5;4
3;7
0.2

6

0.1

6

0.1

740
174
214
313

19;2
4;5
5;6
8.1

113

2.5

62
50

l;4
i.l

188

3.1

2,066
1,495
559
12

14 ; 4
10 ; 4
3;9
0.1

2,389
1,510
276
375

16 ;6
10^5
l;9
2.6

228

1.6

93.6

4,384

30.6

1,818
568
556
335

30;1
9;4
9;2
5.6

1.2

2,556
623
733
344
497
359

17;8
4;3
5;1
2;4
3;5
2.5

359

3 ;4
3.4

Oil
0.1

1,344984
360

9.4
6;9
2.5

1.0

1

5.4

4,175

686
55
175
9
447

17;8
1;4
4;6
0;2
11.6

52

50

1.1

1,136
777
359

29.5
20i2
9.3

4
3
1

5.9

204
204

39
209

Highway
Gasoline
Motor v e h i e l e

Per c e n t

*

Property
Commodity
Tobacco
Liquor
Miscellaneous commodities
General sales
Customs

Total
Amount

license

— - —

2

0.1
—

743

Payroll
Other t a x revenue
Total




12.3

702

18.2

7

0.2

1,452

10.1

30

0.5

23

0.6

103

2.3

156

1.1

6,034

100.0

3,853

100.0

4,46Q£/

100.0

14,347

100.0

!fcablo 2
Federal 1 /
Amount
| Per ccnt
Per ccnt of t o t a l t a x revenue
Per capita tax revenue 6 /
Tax revenue as per cent of
national income 7 /
Non-tax revenue
l/
2/

3/

4/
5/
6/
7/
8/

8/

42;1
46.48
8.7
208

(Cont'd.)
Stated/
Amount j Per ccnt
26;8
29.68
•
5.6
434

Local y
Amount ( Per ccnt

Total
Amount

31;1
34.36

100;0
110.52

6.4

Per con-

20.7

628

1,265

Annual Report of the Secretaiy of tho Treasury, 1938. Federal figures represent yields of tho f i s c a l year ending
Juno 3 0 , 1938.
Unitod States Bureau of the Census, "Financial S t a t i s t i c s o f S t a t e s , 1938 tf . State figures represent y i e l d s of •
the f i s c a l year ending on Docembcr 31, 1938, or tho l a t e s t complete fiscal year ending on a date p r i o r t h e r e t o .
The f i s c a l years i n this report ended on Juno 30, 1938 in 3 7 states; on Doccmbor 31, 1938 i n 4 states; on
September 30, 1938 i n 3 states ; and orx March 3 1 , May 30, August 31, and Octobcr 31, 1938 i n 4 s t a t e s .
Tho Tax Research Foundation, "Tax Systems, 8th c d . , 1940", p. 315 w i t h the exception of the f i g u r o f o r l i q u o r
oxciso taxes which was obtained from tho D i s t i l l e d S p i r i t s I n s t i t u t e , I n c . , Washington, D. C. Local figures
represent various f i s c a l years ending sometime i n 1938 f o r the l o c a l units i n 25 states and sometime i n 1939,
1937, and 1936 for "those i n nearly a l l of the other s t a t e s .
Does not includo p r o f i t s from s t a t e owned liquor stores.
Consists of collections of #936,396,000 of countics , $2,419,540,000 of c i t i c s , v i l l a g e s , towns, ond townships,
$1,004,062,000 of school d i s t r i c t s , ond §97,502,000 of other d i s t r i c t s *
On tho basis of tho estimated population (129,818,000) C S of January 1, 1938.
M
On the basis of tho average (§69,145,000,000) of the estimated national income for calendar years 1337 and 1938*
Does not includc revenues of public-service enterprises.




EXPENDITURES AND REVENUES OF THE YARIOUS
LEVELS' OF GOVERNMENT
Total Expenditures and Revenues
I n Tables I and I I are presented data showing f e d e r a l , s t a t e , and
l o c a l general government expenditures and t a x revenues f o r the f i s c a l years
ending i n 1938, the l a t e s t period f o r which actual or r e l i a b l y estimated
amounts of expenditures and revenues f o r a l l l e v e l s of American Government
are a v a i l a b l e . The expenditures of the l o c a l units are estimates which were ;
a r r i v e d a t i n a study c a r r i e d out i n the Federal Treasury Department i n 1939I n t h a t study l o c a l f u n c t i o n a l expenditures were i n i t i a l l y estimated on the
basis of the Bureau of the Census1 reports f o r 1937* For the three most important categories, ( l ) education, (2) highways and s t r e e t s , and (3) r e l i e f ,
w e l f a r e , and s o c i a l s e c u r i t y , expenditure.'- s t a t i s t i c s f o r 1938 were obtained
from other f e d e r a l departments.
During the f i s c a l year 1938 combined f e d e r a l , s t a t e , and l o c a l expenditures, exclusive of debt r e t i r e m e n t , amounted t o $17*395,000,000 and combined disbursements, inclusive of debt r e t i r e m e n t , amounted t o $18,124,000,000,
as indicated i n Table I .
Of t h i s t o t a l , $989,000,000 consisted of net additions
t o social s e c u r i t y reserves. I n terms of disbursements from own receipts sources,
the f e d e r a l government accounted f o r $7#691,000,000 or 1*2.5$, state governments
f o r $4,283,000,000 or 2 3 . 6 a n d l o c a l governments f o r $6,150,000,000 or 3 3 . 9 $ .
During the f i s c a l year 1932, which was a t the bottom of the depression and before the great r i s e i n public expenditures ( p a r t i c u l a r l y f e d e r a l ) began, combined disbursements, inclusive of debt r e t i r e m e n t , were $13,174,000,000 of
which, also i n terms of disbursements from own receipts sources, the f e d e r a l
government accounted f o r $4,947,000,000 or 37*6$, state governments f o r
$2,214,000,000 or 16.8$, and l o c a l governments f o r $6,013,000,000 or 4 5 # 6 $ , l /
Hence, on the basis of such disbursements, t h e r e l a t i v e f i s c a l importance of
the f e d e r a l and state governments increased w h i l e t h a t of the l o c a l units declined a f t e r 1932 w i t h the great expansion of the a c t i v i t i e s of the f e d e r a l
government under the New Deal which was accentuated by the l o c a l units coming
t o lean on the states and the states coming t o lean on the f e d e r a l government
as they reached the l i m i t s of t h e i r f i n a n c i a l resources. Because of the subs t a n t i a l f e d e r a l aids t o the states and l o c a l governments and the s t i l l greater
state t r a n s f e r s t o l o c a l governments, the l o c a l u n i t s account f o r a larger prop o r t i o n of expenditures f o r own functions than of expenditures from own sources.
As indicated i n Table I , l o c a l governmental units during the f i s c a l year 1938
accounted f o r 43»3$ of the former as compared w i t h 33*9$ of the l a t t e r , state
governments f o r 18.7$ as compared w i t h 2J.6$ and the f e d e r a l government f o r 38$
as compared w i t h i | 2 . 5 $ .
Aggregate t a x revenues f o r the f i s c a l year 1938, as indicated i n
Table I I , amounted t o $14,347,000,000, leaving the excess of disbursements over
t h i s amount t o be financed by non-tax revenues, aggregating $1,265,000,000,
s reductions i n general fund balances, and borrowings. Of t h i s t o t a l of tax
^revenues, the f e d e r a l government collected $6,0314-,000,000 or i|2#l$, the states
collected $3,853,000,000 or 2 6 . 8 $ , and l o c a l governments c o l l e c t e d $4,460,000,000

i / B u l l e t i n of the (Federal) Treasury Department, August, 1939, p . 4#




7

or 31*1$• On the basis of tax collections as w e l l as disbursements, the
r e l a t i v e f i s c a l importance of the federal and state governments have i n creased while that of the local units has declined since 1932. I n the f i s cal year 1932 t o t a l tax revenues were # 8 , , 0 0 0 , 0 0 0 of which the federal
government collected $1,889,000,000 or 22.9$, the states collected #1,701,000,000 or 20.6??, and the local governments collected #U,657,000,000 or
56.5$. 2/
The s h i f t i n the d i s t r i b u t i o n of tax collections by the various
levels of government i n recent years has been due to the numerous and subs t a n t i a l increases i n federal taxation beginning with those provided for i n
the Revenue Act of 1932 and the tax provisions of the National I n d u s t r i a l
Recovery Act i n 1933* to increases i n state taxation including the rapid
spread of general sales taxation which began i n 1933# and to the great decline
i n the property t a x . The share of the federal government i n the aggregate tax
collections of the country has been subject to some f l u c t u a t i o n s . As f a r back
as 1890 federal tax collections represented b3% of the t o t a l for a l l levels
of government. This r a t i o dropped to 28$ by 1912, rose rapidly during the
period of the World War reaching a maximum of 60$ i n 1919, dropped to 39$ by
1925, then reached a low point of 23$ i n 1932 with the drastic shrinkage of
federal revenues i n the depression, and f i n a l l y rose with the recovery of
recent years« During the middle and l a t e twenties the federal government
collected from 35$ to liO$ of the tax revenues w i t h state governments accounting for 15$ to 20$ and local units accounting for h5% to 50$. Then the r a t i o
for the federal government f e l l i n the early t h i r t i e s and rose a f t e r 1932*
that for the state governments rose, and that for the local units remained
around the pre-depression level during the early t h i r t i e s and then declined
to about a t h i r d . 3 / The r a t i o of taxes collected by the national government to t o t a l taxes collected is much higher as a rule i n foreign countries
than i n t h i s country i n spite of the recent tendency toward c e n t r a l i z a t i o n
here. I n Great B r i t a i n t h i s r a t i o is about 80$ and i n France (formerly),
I t a l y , and Japan the r a t i o ranges from 70$ to 80$. Recent developments i n
federal taxation w i l l most l i k e l y increase the r a t i o i n t h i s country, No
significant change took place i n the f i s c a l years 1939 and 19i<0 with federal
tax receipts of #5,^80,000,000 and #5,657,000,000 respectively. However, by
19Ul most of the effects of the increased taxation provided for i n the two
Revenue Acts of 19^0 were manifested, and w i t h federal tax receipts of
#7,761,000,000 the r a t i o of federal to t o t a l tax receipts urns probably about
h5%0 For the f i s c a l year 19^2, federal tax receipts are estimated a t about
#12,000,000,000, assuming pending tax l e g i s l a t i o n is enacted. Hence, the
r a t i o w i l l increase further to probably about 55$*

2/

ttiA,

"

3 ! Clarence Heer, "Federal Aid and the Tax Problem", S t a f f Study No. U
for the Advisory Committee on Education, 1939, P» 31*




- 8 -

Intergovernmental Transfers
To avoid multiple^ counting w i t h respect t o some funds which are
disbursed twice i n many cases and t h r i c e i n a few cases, f i r s t as grants,
shared taxes, and loans t o other governmental units and again by the r e c e i v ing units f o r specific governmental functions, expenditure data i n Table I
are presented i n two forms. Expenditures from the various governmentsf own
sources exclude expenditures which are financed from grants, shared taxes,
or loans received from other government u n i t s . Transfers to other units are
counted as expenditures of the granting u n i t . Expenditures on t h i s basis
show the extent to which each l e v e l of government i s financing the various
services. Expenditures f o r own functions include expenditures which are
financed from funds received from other government u n i t s , but exclude transfers t o other units i n the form of grants, shared taxes, or loans. Expenditures on t h i s basis show the extent t o which each l e v e l of government i s performing the various services. As the aggregate amount of transfers expended
by the granting units under the f i r s t form i s i d e n t i c a l t o t h a t expended by
the r e c i p i e n t units under the second form, the combined t o t a l s f o r a l l governments are i d e n t i c a l under both forms*
I n 1938 an aggregate of 12,368,000,000 was transferred between the
various levels of government — consisting of grants, state-administered taxes
shared w i t h local u n i t s , and federal loans. The bulk of the f e d e r a l grants of
$799*000,000 to state and l o c a l governments were f o r highways and s t r e e t s , .
education, and welfare purposes f Most of the state transfers of $1,5^3#000,000
to local governments were for these same purposes. I n a d d i t i o n , l o c a l units
paid the states $26,000,000 for state highway, state public assistance, and
other purposes.
Because these intergovernmental transfers have become very numerous
and substantial i n recent years, the d i v i s i o n of t o t a l governmental expenditures among the three governmental l e v e l s , a f t e r adjustment for these transf e r s , d i f f e r s s u b s t a n t i a l l y from the d i v i s i o n on the basis of expenditures
from the various governments1 own sources. I n 1938, a f t e r adjustment for
intergovernmental t r a n s f e r s , local expenditures were more than twice as large
as state expenditures and exceeded f e d e r a l expenditures by a substantial
amount.

Purposes of Expenditures
Prior to the Great Depression, the chief items of expenditures for
a l l governmental l e v e l s , i n order of t h e i r magnitude, were education, highways
and s t r e e t s , and national defense w i t h the l a t t e r moving from t h i r d to f i r s t
place i n time of war. The chief expenditure category f o r the f e d e r a l government was national defense, f o r the state government was highways, and f o r the
local units was education, The depression of the t h i r t i e s has changed t h i s
order of things somewhat but not e n t i r e l y as oan be seen by examining the
amounts of expenditures f o r own functions i n the columns a t the r i g h t i n
Table I . Disregarding the large amount under " A l l other", the most important




expenditure category f o r a l l American governments i n t h e f i s c a l year 1938 was
r e l i e f , w e l f a r e , and s o c i a l s e c u r i t y . This category amounted t o $3,233#000,000
or 17#8$ o f t o t a l disbursements. Education, amounting t o $2,1+92,000,000 or
13*7$ of t h e t o t a l , was i n second place i n s t e a d o f f i r s t , and highways and
s t r e e t s , amounting t o #1,675*000,000>or 9*2$ o f t h e t o t a l , assumed t h i r d place
i n s t e a d o f second. By 1938 n a t i o n a l defense, amounting t o 11,620,000,000 or
8,9$ o f t h e t o t a l , had dropped f r o m i t s peace-time p o s i t i o n of t h i r d place t o
f i f t h , being exceeded by t h e amount f o r i n t e r e s t i n f o u r t h place o f $ 1 , 6 ^ 2 , 000,000 or 9*1% o f t h e t o t a l .
I n c i d e n t a l l y , muQh o f t h e r e c e n t l y expanded
i n t e r e s t i t e m i s f o r borrowings f o r w e l f a r e purposes. I n 1938 t h e l e a d i n g
category f o r t h e f e d e r a l government was r e l i e f » w e l f a r e , and s o c i a l s e c u r i t y
w i t h n a t i o n a l defense surpassed i n the t h i r t i e s f o r t h e f i r s t time i n h i s t o r y
as a r e s u l t o f t h e unprecedented e n t r y of t h e f e d e r a l government i n t o t h e w e l f a r e f i e l d , h e r e t o f o r e l e f t f o r t h e most p a r t t o t h e s t a t e s and t h e i r l o c a l
s u b d i v i s i o n s . For t h e s t a t e s and l o c a l u n i t s the o l d leaders s t i l l continue
w i t h highways i n f i r s t place f o r t h e former and education i n f i r s t place f o r
the l a t t e r .
Since 1938 t h e c h i e f development i n t h e way o f a change has t o do
w i t h t h e f e d e r a l government. I t p e r t a i n s t o t h e new n a t i o n a l defense program
i n i t i a t e d on an expanded scale i n 19^0. The f e d e r a l expenditures f o r n a t i o n a l
defense i n t h e f i s c a l years 1939 and 19l±0 continued a t t h e peace-time l e v e l
of r e c e n t years w i t h expenditures o f $1,163,000,000 and $1,559*000,000 re~
s p e c t i v e l y , But i n t h e f i s c a l year 19Ul f e d e r a l expenditures f o r n a t i o n a l
defense amounted t o $6,255*000,000 or r o u g h l y
o f f e d e r a l expenditures of
$12,710,000,000• During the f i s c a l year 1 9 i t i s estimated t h a t n a t i o n a l
defense w i l l account f o r $18,000,000,000 or over 73$ of e s t i m a t e d f e d e r a l expenditures o f $2^,581,000,000.
Sources of Tax Revenue
T o t a l f e d e r a l , s t a t e , and l o c a l t a x c o l l e c t i o n s i n t h e f i s c a l year
1938 amounted t o $lkf3h7»000,000, This amounted t o $110.52 per c a p i t a as
compared w i t h per c a p i t a amounts o f $65.19 i n 1932 and $80.30 i n 1929. The
t o t a l c o l l e c t i o n s f o r 1938 amounted t o 21.8$ o f t h e average o f t h e estimated
n a t i o n a l income f o r 1937 and 1938. From 1890 t o t h e World War, t a x c o l l e c t i o n s
i n t h i s c o u n t r y were between 6$ and 7% of t h e n a t i o n a l income. The World War
permanently upset t h i s r e l a t i o n s h i p . During t h e t w e n t i e s t h e r a t i o s e t t l e d
on a 11-12$ l e v e l . I n t h e depression o f the t h i r t i e s t h e r a t i o r o s e .
It
v a r i e d w i t h i n a 15$ t o 17$ range through 1937. h / . I n 1938 and probably i n
1939* 19^0, and 19I4I t h e r a t i o has been about 20^ f For 19U2, however, esti->
mates of t a x c o l l e c t i o n s , assuming t h a t pending f e d e r a l l e g i s l a t i o n i s enacted,
and estimates o f n a t i o n a l income i n d i c a t e a r a t i o o f about 21$. I n recent

U/

N a t i o n a l I n d u s t r i a l C o n f e r e n c e B o a r d , " C o s t o f Government i n t h e U n i t e d
S t a t e s , 1 9 2 5 - 2 6 " ( 1 9 2 7 ) , p . 77, and " C o s t o f Government i n t h e U n i t e d

S t a t e s , 1935-37 ,f (1938), p . 30 and p . 331




-

10

years t a x c o l l e c t i o n s have increased t o be sure f r o m increased l e v i e s and
r i s i n g business a c t i v i t y , but t h e n a t i o n a l income has a l s o increased. The
World War d i s t u r b e d the o l d r e l a t i o n s h i p between t o t a l t a x c o l l e c t i o n s and
n a t i o n a l income. The r a t i o o f the former t o the l a t t e r was doubled f The
g r e a t depression o f t h e t h i r t i e s has doubled i t a g a i n .
The most important s i n g l e source o f t a x revenue i n t h e U n i t e d
States i s the p r o p e r t y t a x which produced $4,384,000,000 or 30.6$ o f the
t o t a l t a x revenues c o l l e c t e d i n t h e f i s c a l year 1938, as i n d i c a t e d i n Table
I I . However, i t s margin o f l e a d e r s h i p over other taxes has d e c l i n e d i n t h e
t h i r t i e s . Recently t h e aggregate y i e l d i n absolute amount of the p r o p e r t y
t a x has tended t o remain r a t h e r constant. I t has d e c l i n e d as a s t a t e source
of t a x revenue i n r e l a t i v e importance since t h e World War, accounting f o r
o n l y 5 - 4 ^ o f s t a t e t a x c o l l e c t i o n s i n 1938. On the o t h e r hand i t continues
t o account f o r over 90$ of the t a x c o l l e c t i o n s of l o c a l u n i t s and seems t o
be h o l d i n g i t s own so f a r as absolute amount of y i e l d i s concerned.
Net income t a x a t i o n i s second i n importance as a source o f t a x
revenue. Taxation on i n d i v i d u a l net income i n t h e f i s c a l year 1938 amounted
t o $1,495,000,000 or 10.4$ o f t o t a l t a x revenues. T a x a t i o n on corporate
net income accounted f o r $1,510,000,000 or 10.5$. Besides the f e d e r a l
government, 31 s t a t e s l e v y on i n d i v i d u a l net incomes w i t h graduated r a t e s
i n a l l b u t t h r e e , and 32 s t a t e s l e v y on corporate net incomes w i t h f l a t
r a t e s i n a l l b u t s i x . However, t h e b u l k o f t h i s t y p e o f t a x a t i o n i s imposed by t h e f e d e r a l government. I n f a c t t h i s t y p e of t a x a t i o n i s the
leader among f e d e r a l t a x e s . I n 1938 t h e i n d i v i d u a l net income t a x accounted
f o r 21.3$ a n d t h e corporate net income t a x 22.2$ or b o t h t o g e t h e r 43>5$
of f e d e r a l t a x c o l l e c t i o n s . The f e d e r a l income t a x came t o account f o r a
v e r y l a r g e p r o p o r t i o n of f e d e r a l t a x revenues before t h e depression of t h e
t h i r t i e s diminished net incomes. I n d i v i d u a l and corporate net income t a x a t i o n f u r n i s h e d 61.5$ of f e d e r a l t a x revenues i n 1926 and 6 6 t 2 $ i n 1931This r a t i o f e l l t o 27.7$ i n 1934. I t has increased since t h e n as a r e s u l t
o f increased r a t e s and t h e r i s e i n business a c t i v i t y .
Over t h e course of h i s t o r y t h e f e d e r a l t a x s t r u c t u r e has changed
s u b s t a n t i a l l y . P r i o r t o the C i v i l War, customs r e c e i p t s accounted f o r about
85$ o f t h e f e d e r a l t a x revenues. From t h a t c o n f l i c t t o the World Tifar,
customs accounted f o r about h a l f and i n t e r n a l e x c i s e s , m o s t l y on l i q u o r and
tobacco, accounted f o r r o u g h l y t h e other h a l f . A f t e r t h e World War through
t h e t w e n t i e s , corporate and i n d i v i d u a l net income t a x a t i o n came t o account
f o r about 60$ w h i l e customs and i n t e r n a l excises each d e c l i n e d t o 15$ of
f e d e r a l t a x c o l l e c t i o n s . Then i n the l a s t decade, corporate and i n d i v i d u a l
net income taxes f e l l d r a s t i c a l l y u n t i l t h e y accounted f o r o n l y about a
f o u r t h and t h e n rose u n t i l t h e y came t o account f o r over 40$ o f f e d e r a l
t a x revenues. Meanwhile t h e customs revenue d e c l i n e d f u r t h e r u n t i l i t




- 11

amounted t o o n l y
and i n t e r n a l
excises rose t o account f o r 30»1%
o f f e d e r a l t a x revenues i n 1938. The r i s e i n t h e l a t t e r has been due f o r
t h e mo§t p a r t t o t h e increased r a t e s and scope o f i n t e r n a l revenue t a x a t i o n
r e s o r t e d t o by Congress i n t h e middle o f the l a s t decade i n order t o o f f s e t
a t l e a s t i n p a r t t h e d r a s t i c d e c l i n e i n t h e proceeds o f the income t a x .
Then i n t h e l a s t decade came t h e p a y r o l l taxes w h i c h i n 1938 accounted f o r
12.3% o f t h e f e d e r a l and 18.2$ of t h e s t a t e t a x c o l l e c t i o n s .
I n s t a t e f i n a n c e t h e l e a d i n g t a x i s t h e g a s o l i n e l e v y which
accounted f o r 20.2$ o f s t a t e t a x c o l l e c t i o n s i n the f i s c a l year 1938.
It
w i l l be noted t h a t t h e r e c e i p t s from t h i s t a x and t h e motor v e h i c l e l i c e n s e
t a x combined amounted t o almost a t h i r d of s t a t e t a x c o l l e c t i o n s . The gen-*
e r a l sales t a x accounted f o r 11.6$ o f s t a t e c o l l e c t i o n s . P r i o r t o 1933 o n l y
t h r e e s t a t e s had t h i s type of t a x . Then a l a r g e number r e s o r t e d t o i t i n
the d i s t r e s s e d years o f 1933t 193^* and 1935• Since 1935 from 20 t o 23 s t a t e s
have imposed the t a x .
A t present 22 s t a t e s impose t h e t a x along w i t h a few
m u n i c i p a l i t i e s i n c l u d i n g New York C i t y . The d e c l i n e i n the use o f the p r o p e r t y t a x , t h e s u b s t a n t i a l r i s e i n the gasoline t a x , and t h e phenomenally r a p i d
growth i n t h e general sales t a x are t h e o u t s t a n d i n g developments i n modern
times i n s t a t e t a x a t i o n . Among the l o c a l u n i t s , t h e p r o p e r t y t a x continues
t o be t h e source o f t h e b u l k of l o c a l t a x c o l l e c t i o n s .