commission on fiscal imbalance 合集

During a period of relatively low inflation state aid

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Unformatted text preview: sing are due to several factors. States first had to pick up some of the slack from the slowdown in federal aid growth in the 1980s. Then the recession of 1990-92 forced many states to raise taxes to cover expenditure needs, tax increases that generated more revenue when the economy rebounded. The inflation in health care costs hit states hard, both in terms of health care costs for their employees and in terms of their matching share for the federal Medicaid program. Finally, most states have had to respond to legal challenges to their systems of elementary and secondary school finance. The usual response to such court rulings has been increased state aid. During a period of relatively low inflation, state aid to their local units of government grew 25% from 1992-1996 (TABLE FIVE). What is noteworthy is the fact that state and local elected officials have been willing to take the politically dangerous risk of increasing revenues in an era of Tax Revolt fears and one of increasing competition for businesses. 30 Commission on Fiscal Imbalance 3.3. Summary The shift of fiscal power from national to state governments is a result of many forces. State governments greatly modernized their political, administrative, and fiscal systems in the last half of the twentieth century, improving their overall capacity and trustworthiness. Criticism of centralization of power in Washington began with President Nixon, and perhaps peaked under President Reagan. An intellectual focus on rational choice theory swept academia in the 1980s, adding intellect to rhetoric. After an early recession, the cumulative state fiscal position grew stronger for the rest of the decade. Politically the nation’s representation had steadily been moving South and West, two areas generally more suspicious of Washington than others. The newly elected, both at the state and federal level, were often Republicans who generally hold a bias in favor of local government, and culminated in the Republican Revolution of 1994. Meanwhile state and local governmental officials were losing their power over Congress, due to the increasing presence of single interest groups able to help fund election campaigns and the subsequent centralization of political party activities.26 These groups placed their own claims on federal resources, and in doing so helped increase federal deficits, which were to become a severe obstacle to any continuation of the increases in federal grants that had been occurring. Two prime examples of this loss of power are the termination of the federal general revenue sharing program, the most popular program ever among state and local officials, and the elimination of tax deductibility of state and local sales taxes under the 1986 tax reform. There is something counter-intuitive above these two actions in a period characterized as “prostate.” Decentralization US-style resulted in states getting more power, but reduced their power over Washington’s budget. It is also important to note that in the last decade the US Supreme Cou...
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