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Jvisory Commission on IntergOVCrnmcntal Relations
Washington, u. C. 20575
APR 7 1969
honorable John 5. Hold
House of Representa tives
Hashington, D. C. 20515
Dear Congressman Hold:
in response to your letter of March 28, 1969, let me first
point out that it was never the intention of the Advisory Omission
on Intergovernmental Relations to "point the finger" at any State--
either for merit or criticism. Rather. our intention was simply to
provide a factual basis for determining the proportion of State and
local taxes to personal income. In this regard, you will note that
the heading of Table l avoids the phrase "tax burden" and simply
says "State and Local Revenue as s Percent of State Personal Income.
by State. 1957. 1962 and 1967."
Similarly my statement in the accompanying news release was
neutral on this point. Specifically. my remarks were "Tax collections
ranged from a high of more than 12 percent of personal income in
unwaii, Hyoming and New York to a low of less than 8 percent in
Ohio and illinois. Whether we view this an index of tax effort or
tax burden depends upon how we View the role of State and local gov-
ernment in the American federal system."
Let no further point out that the data presented in Table l
are essentially similar to the series published by the Bureau of the
Ceneus in their annual publication, Qggggggentsl tinances. Census
presents several series of general revenue per $1,000 of personal
income and one of their specific tabulations is total State and local
taxes in relation to income. further, the series published in our
report is similar to the data that is so frequently mentioned as
the "tax effort" factor to distribute various proposed revenue-sharing
plans.
with regard to the measure Hr. Allen has proposed, it would
seem necessary to exclude the State and local taxes that other States
export before determining wyoming's relative position. It is not
clear from your letter whether this has been done in reaching the
conclusion that Nyoming would emerge 33rd or 32nd under this substitute
measure. The reference that "Hyomins has some unique conditions"
that vitiatc our approach makes me suspect that this was not done.
Tax exporting, however, is not unique to Wyoming; virtually all States
Honorable John 8. Hold 2 -
do it to some extent. You may incidentally be interested in 0 anne-
what dated study that appeared in the National Tax Journal. March
1967, pp. 49-77. in that study. Charles R. McLure, Jr., made
estimates of the percentage of all State and local taxes that were
exported (or 1962. Mia eatinates for abort-run exporting show that
nine Stateal/ export acre of their St; e-local taxes than does
Wyoming; in the long run. five ltste exceed Hyoming's rate of
23.3 percent. Perhaps of even greater significance is Mr. Nature's
statement (p. 66) "However, the overall export rates for 1962 are
fairly abnilar between atates. despite considerable differences in
state economiea and tax structures. to the extent this observation
is true, Wye-ing's tax exporting is not only not unique but not
strikingly different from the practice of other States and. of
course. roughly similar tax exporting ratios would lead to similar
rankinga among States both in State and local "tax burden, or under
the approach we took.
As a second coauent on Mr. Allen's proposed measure. let me
offer the suggeation that it the purpoae of the alternative series
in to dietinguiah tax burdens among States. it should not only ex-
clude State and local taxes exported by all States but it should
include State and local taxes ilported by the reapective States
since the latter are ultimately also paid by reaidents of a particu-
lar State. I am not at all sure that Wyoming would emerge on a
favorable basis it thia were done. Essentially the reasons
Hr. Allen offers for "favorable tax exporting" in "yo-in3--i.e..
its extractive reaources--would he the basia for an "unfavorable
tax inputting" situation--the relative lack of a Ianufacturing sec-
tor. I do not. however. know of any nonparahle tax importing studies
that have been done.
The question of estimating tax burdens for residents of a
particular State then can become a quite complex exerciae. It is
for the reasons given here that the stat! of the Advisory Conndsaion
choee to present the familiar State and local taxes as a percent of
personal income in ita report. with these points in hind, let me
again state that we felt we were publiahing useful and factual data
regarding one of the many faceta of State-local finance.
1/ Theae states are: Arizona, Connecticut. Delaware, Louisiana,
Hichigan. Nevada, North Carolina. South Carolina and Texas.
A/ These Statea are: Arizona, Delaware. Louiaiana, Nevada and Texas.
Honoreble John 8. Hold 3 -
After having eeid all of this. 1 went to ehnre your concern
et the we, the new. India heve handle! these date to the detriment
of thoee Stetee that heve the higheet ;etio of State end locel tax
receipte to totel peroonel intone. Speciticelly, 1 en etteching
e letter to the Editor of the U. 1. Ref! and 22:15 lgggrt, telling
hie ettention to the highly questioneh e terminology need to
deecrlbo our State and local tax findingo.
Sincerely yours.
lerrie Bryant
Chair-en
lncloeure
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