CONGRESSIONAL RECORD -- SENATE

March 4, 1969

Page 5247

ACIR REPORT ON STATE AND LOCAL FINANCES

Mr. MUSKIE. Mr. President, the recently published report of the Advisory Commission on Intergovernmental Relations, concerning State and local government finance, offers a guideline for developing a more effective and equitable tax system below the Federal level.

This newest report, along with the Commission's earlier study on fiscal balance in the American Federal System, comprise a thorough review and assessment of the needs and the ability of State and local tax sources to respond to ever-increasing demands and costs of government services. I urge all Members to give these reports careful review and consideration in the light of what they propose for action.

A most significant element of their report concerns the experience of Wisconsin with what is called a "circuit breaker system." Wisconsin has been successful in shielding low-income families, the elderly, and others similarly affected, from the overloading effects of the property tax.

They have done this by granting relief to elderly homeowners on that part of their tax load which is excessive when compared to their income. In the case of the renter, Wisconsin allows similar relief on the assumption that 25 percent of the rent paid is actually for property taxes.

Wisconsin earmarked a part of the revenue gained from a new sales tax in order to reimburse the local governments. Furthermore, they have shown conclusively that it is not necessary to force low-income households through the "property tax wringer" in order to finance local services.

The result of these steps has been to convert a highly regressive tax into a proportional levy. And, it has been done at the price of modest loss to the State treasury. The 1966 cost to Wisconsin State government was only $5 million, or less than 1 percent of the total collected via property taxes. Most significantly, 60,000 low-income families gained some degree of tax relief.

The Advisory Commission report also points out that State income taxes can be broad-based, flat-rate taxes. Wisconsin's experience points out that, even with personal exemptions, they can be made to combine a revenue punch with a reasonable degree of progression. Such personal exemptions can, at the same time, protect the very poor, and can be made to adjust tax liability in view of the size of the family.

In a day and age when we hear a great deal about a threatened "taxpayer's revolt," it is important that our tax systems be made more responsive to the ability of the individual to bear the burden.

There is added discussion mounting to provide for "a no-strings attached" system of sharing Federal income tax revenues with the States. Credit against Federal taxes for State income taxes paid and authority for the States and Federal Government to merge their tax collecting mechanisms are matters of immediate concern to the Congress. The significance of the Commission's report is especially notable in view of the unrelenting expenditure demands being placed upon our State and local governments, and the various suggestions already made for meeting those demands.

The characteristics of a "high quality State-local tax system" are recognized by all of us. Such a system is fair. It is convenient. It is simple, and it is productive. I believe that we should take a fresh look at the series of recommendations contained within this report, the related ACIR study on fiscal balance within the Federal system. In the weeks and months ahead, we can anticipate legislative proposals aimed at translating these findings into new public law. This is particularly so if States are to close the gap between increased expenditures and the productivity of their current revenue systems. Consumer sales and property taxes cannot carry the load alone. How we respond to these proposals may well determine how responsive our State and local governments can honestly be expected to be to growing local needs.