CONGRESSIONAL RECORD -- SENATE
May 19, 1967
Page 13297
RETREAT FROM TAX-SHARING
Mr. MUSKIE. Mr. President, Congress has before it this year scores of so-called tax-sharing proposals. These have been offered as means of redressing the fiscal imbalance among the various levels of government and of strengthening the federal system. Among these proposals is a wide range of methods and approach, but most have this in common: They would have the Federal Government serve as collector of taxes and return some percentage of tax revenues to the States with few if any controls attached.
I agree that there is fiscal imbalance among the several levels of government and that the federal system needs to be strengthened. I do not agree, however, that the way to strengthen State government is to give it successive infusions of Federal money which will enable it to continue to avoid the responsibility of developing its own fiscal resources to support a more active role in the governmental affairs of the Nation. That is the way to hasten the decline of State government and to induce a dangerous degree of dependence by States on the Federal Government.
This is underscored by the difficulty which Governor Romney, of Michigan, has recently encountered with his tax reform measures. An editorial published in the Washington Post of May 16, 1967, makes the point that it is this kind of evasion of State responsibility even more than an expanding Federal bureaucracy that is dangerously undermining State government.
Because of its relevance to the tax-sharing proposals now pending in Congress, I ask unanimous consent that the editorial be printed in the RECORD.
There being no objection, the editorial was ordered to be printed in the RECORD, as follows:
RETREAT FROM TAX-SHARING
The echoes that are coming out of Lansing provide a strange commentary on the debate in Washington on tax-sharing. Governor Romney is struggling against great odds to induce the Michigan Legislature to pass an income tax. All the political leaders seem to agree that some additional taxation is essential to meet the state's obligations. Yet both the House and Senate have voted down the Governor's tax reform program, and the question of whether they can be induced to enact an income tax of any sort is still wide open.
While Michigan Congressmen are pleading for a share of the Federal income tax, the state legislators are balking at the idea of an income tax of their own. They would rather let Congress take the rap. It is this evasion of state responsibilities even more than an expanding Federal bureaucracy that is dangerously undermining state government.
Sponsors of numerous tax-sharing bills before Congress excuse their circuitous approach to critical state problems by saying that the Federal Government has dried up tax resources. But this is demonstrable nonsense. All of the more progressive states have income taxes, and the direct collection of this revenue by the states is not more painful than the national income tax. As a matter of fact, the local income taxes are less painful, because they can be deducted from income in calculating the Federal tax.
The only kind of tax-sharing that is compatible with our Federal system is a national incentive to the states to put their own revenue laws in order. Michigan, for example, instead of pleading for return of 5 per cent of the income tax its citizens pay to the Federal Treasury, as some of the tax-sharing bills provide, could more appropriately collect through its own machinery a state surtax equal to 5 per cent of the Federal tax. We would like to see Congress give Michigan, and all the other states, an incentive to do this. But Congress ought not to usurp their revenue-raising function.
Fortunately, some of the tax-sharing plans would reward the states for facing up to their own revenue problems. Representative Laird's bill would grant a 40 per cent tax credit to Federal taxpayers for all state and local taxes paid. This seems to us a constructive approach so far as it goes. A still larger credit against Federal taxes might be allowed for state and local income taxes
paid as an incentive to the enactment of modern tax laws within the states. There are many ways of helping the states, but the basic aim should be to get sound tax laws on their own books instead of funneling revenue for local purposes through Washington.