Federal-State Tax Relations

Report Outline
Federal-State Functions and Tax Questions
Overlapping Federal, State, Local Taxes
Proposals for Separation of Tax Sources
Means of Coordinating Overlapping Taxes

Federal-State Functions and Tax Questions

Plan for Broad Survey of Federal-State Relations

Prospects for carrying out a comprehensive survey and reappraisal of the functional and fiscal relationships of the federal and state governments, as repeatedly advocated in recent years, received a strong boost Feb. 26 when President Eisenhower moved into active support of the proposal. Following a conference of the President with several state governors, a group of Senate and House members, and various federal officials, the White House announced that legislation would be sought promptly to authorize appointment of a bipartisan commission to study and recommend measures “to eliminate hodge-podge duplication and waste in existing federal-state relations affecting governmental functions and taxation.”

The President observed, in a separate statement, that “The existing systems of taxation, both at the federal and state level, contain many gross inequalities insofar as the tax burden between citizens of different states is concerned.” He added that “There is often a pyramiding of taxation, state taxes being superimposed upon federal taxes in the same field.” In press interviews after the White House conference, Gov. Kohler of Wisconsin foresaw a “shifting of the burden” from the federal to state governments, and Gov. Driscoll of New Jersey commented that a shifting of functions might result in lower taxes because “we contemplate that the same services could be performed for less money.”

Sen. Taft (R., Ohio), another participant in the conference, said the discussions had covered the whole field of federal-state activities, including social security, health, welfare, education, housing, and highway construction. He suggested that the first job of the proposed commission should be “the development of a philosophy of action on the entire question of federal aid, perhaps imposing definite limitations on what the federal government should do.” Taft had said two days earlier, at Ohio Wesleyan University, that the underlying philosophy of the new administration differed from that of its predecessor in that it was “trying to do the job at hand with as little government action as possible.”