May 13, 1963
PAGE 8290
FISCAL PLIGHT OF LOCAL GOVERNMENTS
Mr. MUSKIE. Mr. President, I ask unanimous consent to have printed in the RECORD an excellent article by Frank C. Porter which appeared in yesterday's Washington Post. In his column entitled “It's the Rising State-Local Levies That Make U.S. Taxpayers Cry Uncle,” Mr. Porter presents authoritative statistics which explode two basic myths concerning recent efforts of both the States and the National Government to strengthen our Federal system.
This article contains graphic evidence proving that the Federal Government over the past decade has not experienced a disproportionate growth in its debt, expenditures, or civilian employees. On the contrary, Federal spending rose only 35 percent over the past 10 years, compared to 130 percent for the State and local levels of government, and the national debt increased 15 percent during this period, as against 250 percent for the States and local governmental units. Further, over the past 5 years, the hiring of new personnel on the State and local levels has amounted to 13 times the number added to the Federal civil employees' lists. These figures provide ample proof that Federal growth in these three areas has been modest and even conservative by State and local standards.
In addition, they clearly demonstrate the inaccuracy of the widely shared belief that State and local governments are unwilling or unable to assume their proper share of the financial responsibility for the expanding governmental services that the American public has demanded since World War II.. These statistics, along with the fact that State and local taxes are now two-thirds as large as Federal revenue, indicate that these levels of government are working strenuously to make themselves viable instruments of 20th century democracy.
When related to each other, these developments highlight the overwhelming need for continuing the pattern of intergovernmental collaboration that has emerged over the past 15 years. No level of government alone has been able to bear the cost of these expanding domestic services. Instead, each of the three planes has joined in the spirit of traditional American cooperation to share this staggering financial burden. This collaborative relationship must be continued and strengthened if the future of our federal system is to be secure.
There being no objection, the article was ordered to be printed in the RECORD, as follows:
IT'S THE RISING STATE-LOCAL LEVIES THAT MAKE U.S. TAXPAYERS CRY "UNCLE"
(By Frank C. Porter)
The economy bloc, venting its full fury on an administration that seeks simultaneously to boost Federal spending and slash taxes, may be trying to put out a brush fire in the front yard while the barn burns down out back.
For while the harsh glare of publicity focuses on Uncle Sam's fiscal troubles, taxes and spending in the cities, counties and States across the land are climbing at a dizzying rate.
Federal expenditures have risen about 35 percent in the past decade, but spending by State and local governments has shot up 130 percent in the same period. The Federal debt has increased 15 percent in the decade; State and local debt is 2½ times what it was at the end of 1962. In the past 5 years alone, state and local governments have hired more than 13 times the number of new civilian employees added to Federal payrolls.
While the White House, Treasury, and Capitol Hill bear the brunt of squandermania charges -- particularly from powerful business groups such as the Chamber of Commerce and National Association of Manufacturers -- evidence points to a growing grassroots rebellion against high taxation and spending by the smaller political jurisdictions.
In New York City, more than 1,300 citizens converged on city hall one day last month to protest Mayor Robert F. Wagner's proposal to boost the city sales tax from 3 to 4 percent (it passed).
In Detroit, voters turned down decisively a $90 million school bond issue and a proposal to raise school taxes.
Voters, in fact, have rejected 32 percent of the $1.2 billion in new bond issues submitted to them in the first four months of 1963. Five years ago, the rejection rate was 25 percent; in 1953, it was only 17 percent.
The political death toll of State governors of both parties in last fall's elections has been widely attributed to their advocacy of unpopular tax increases.
Economist Eliot Janeway links "a dramatic breakout" of support for Senator BARRY GOLDWATER, Republican, of Arizona, to "a taxpayers' revolt, still largely unsung but gathering strength every day, not only in liberal-Democratic New York City itself, in GOLDWATER's Arizona, but also in most every place in between."
"But if the opponents of local government spending are becoming more vocal, so are the advocates -- those who earnestly cite the Nation's great unmet needs for more schools, highways, hospitals, sewers, parks, playgrounds, libraries, welfare payments, better correctional institutions, job retraining, police and fire protection.
Since they involve money, the most emotionally supercharged commodity known to man, taxes are seldom the dreary, dull subject they are often represented. Almost anyone with an adding machine and an ax to grind can convert them into a fiscal horror story, on the one hand, or the image of a fount from which all good things flow, on the other.
For example, all taxes -- Federal, State and local -- rose from a piddling $1.4 billion in 1902 to more than $124 billion last year, nearly a 100-fold increase in 60 years. Or again, the total of all kinds of governmental debt amounted to an average $41 for every man woman and child in 1902; now it is more than $2,000.
But defenders of public spending consider such comparisons inept. They involve two totally different worlds, they argue, and ignore war, depression, inflation, a fantastic increase in the Nation's wealth, changes in mores and political philosophy and the population explosion.
Total taxes rose from $46 billion at the end of World War II to $116 billion in 1961, a jump of more than 150 percent. But taking population growth into account, these same taxes on a per capita basis show an increase of slightly more than 100 percent. And the rise is further reduced to only 30 percent if the per capita figures are adjusted for price changes over the years.
Except in war time, State and local spending and taxation traditionally outpaced Federal operations until a quarter century ago. Then the New Deal sought to pull the United States out of the worst depression in history through forced-draft spending, Federal expenditures inched above State and local spending in the mid-1930's. Much of this was done through deficit financing and it was not until 1942, with the Nation already at war, that Federal taxes rose above the State-local level.
Federal taxation and spending, which had extremely steep rises in both World War II and the Korean war, failed to fall back below the State-local level after the hostilities. But the proportionate gap is closing rapidly; State and local taxes are now two-thirds as large as the Federal take; they were only a fourth in 1944 and a third as recently as 1954.
The narrowing gap is even more graphically represented, which shows Federal taxes as a percentage of the country's total output of goods and services in an irregular but substantial decline while State and local taxes in terms of gross national product have been rising steadily since 1944.
Federal operations have continued at an abnormally high level largely because of the United States' role as leader in the cold war. Eliminating defense and foreign spending, interest on the national debt (most of which is the result of prior wars) and payments to State and local governments, Federal spending totals less than half that of the smaller jurisdictions.
State and local debt still is only about 27 percent as large as the Federal. But since World War II, the Federal debt his risen moderately, from $270 billion to about $300 billion, while State and local indebtedness has grown fivefold, from $16 billion to $80 billion. Note that total public debt, in per capita and constant dollar terms, has declined since World War II..
Total public debt also has declined since the war relative to the Nation's total output, or gross national product. There has been a massive shift of debt from the public to the private sector of the Nation's economy, a trend which is still continuing.
Here are some of the reasons behind the spectacular growth in State and local operations:
Communities have had an extremely heavy backlog of pent-up capital needs accumulated not only during the austerity of wartime but during the paralyzing poverty of the great depression.
The postwar baby boom has put an unprecedented strain on educational facilities. Beyond this, society is much more demanding of its schools than it was a generation ago, particularly since it is increasingly harder to find a place for the untutored, unskilled worker. Education now takes 31 cents out of every State-local revenue dollar, the biggest slice of the expenditure pie.
To meet these still-growing needs, officeholders are sometimes forced to desperate measures such as the semiannual State lottery passed last month by the New Hampshire legislature. A Colorado political leader has suggested that his State should begin thinking about a lottery, too, and predicts that "you're going to find a lot of States going into it."
Just last week, Indiana became the 37th State to adopt a sales tax, and four others have boosted their rates this year. Nearly 2,000 cities, towns and counties also have a sales tax.
Thirty-two States now have income taxes, of which 26 collect it through withholding. These levies now account for nearly $3 billion a year against only $422 million in 1946. The big mainstay, however, is still the real estate tax, local and State revenues from which jumped from less than $5 billion in 1956 to a current rate of about $20 billion.
Does the continued rapid growth of local taxing and spending mean that Federal power is diminishing and the communities are doing more for themselves?
Tax experts say they don't think so. They point out that the expansion has been in areas traditionally reserved to the States, counties and towns, such as education. One points out that this expansion is largely the effect of expansion of the economy as a whole.
Many of the goods and services provided by State and local governments are what economists call "complementary commodities." The growth in privately produced automobiles, for example, necessitates a parallel growth in publicly built highways.
The big expansion in State-local spending and taxation may be a major factor contributing to the growing Federal deficit.
President Kennedy has observed that without "intergovernmental payments" -- funds paid by the U.S. Government to States and local governments -- the budget would be in balance.