The Limitations of Revenue Sharing

Abstract

The allegation that all or most states and cities face a general financial crisis is not consistent with the facts. Special demographic conditions, which have since altered, account for the huge expansion of state and local expenditures during the 1960's. In addition, analysis of state budgets shows that the majority make inadequate use of the financial resources now at their command. Similar analysis also shows that substandard state and local services, where they prevail, are attributable in greater degree to an unwillingness to meet social obligations than to financial limitations. Revenue sharing provides no assurance that the funds will be used to remedy deficiencies in public services. Evidence suggests that much of it would be used for reducing state and local taxes or frittered away in frivolous expenditures or graft. The real financial, economic, and social problems in many states and cities may best be met by direct action: federalization of welfare, which would help the poor; the tax credit plan, which would encourage reform of regressive state and local tax structures; and more effective federal leadership and grants-in-aid, which would raise social standards and get money purposefully and directly to the cities.