This preview shows page 1. Sign up to view the full content.
Unformatted text preview: he Constitution gave the federal government the power to levy a tax
on income, a power previously held only by states.7 As the war unfolded, rates climbed from 1-6% to 6-65% and
coverage was broadened. When the war was over, rates fell, but never back to previous levels. In response to World
War II coverage was again broadened, and rates raised. Perhaps as important the federal government began the
practice of withholding income taxes from wages, which greatly reduces taxpayer opposition to tax burdens. The impact
of these changes was dramatic. In 1927 federal government revenues were approximately 58% of state and local
government own source revenues; by 1952 they were 170%.
It was in the second half of the twentieth century that intergovernmental fiscal assistance was to take center stage in the
evolution toward more federal government power. The return of US soldiers from World War II and a desire to fuel a
domestic economy lead in the 1950s to federal government grant programs aimed at, among other things, building
homes and the highways to connect them. Then in the 1960s civil unrest and concern over poverty lead to President
Johnson’s Great Society programs. Included were important intergovernmental programs aimed at medical care for the
poor (Medicaid), and others designed to help state and local governments fight crime, rebuild inner cities, improve public
transit, and help in job training.11 Federal grants-in-aid grew from 4.7% of total federal outlays in 1955 to a historic high
of 17% in 1973, and went from providing 10.2% of state and local revenues to 24%, or nearly one in every four dollars.12
Intergovernmental aid increased national government power without increasing national government presence, thus
obscuring for many citizens the shift in government authority.
What is apparent from a brief review of this history is that the increase in national government power did not occur
according to any well-reasoned grand design. It grew greatly as a pragmatic response to crises, both at home and
abroad. None of this history argues that the national government was more knowledgeable, or had better values, than
did its state and local counterparts. What it did have was Constitutional authority for defense, and fiscal superiority. 2. THE US INTERGOVERNMENTAL FISCAL SYSTEM By 1975 the number of federal grant programs had grown to 442 from 132 programs in 1960 (TABLE ONE). The federal
government’s intergovernmental grant system had become large, complex, and increasingly under attack. While in the
broad sense many grants were a response to trends and dislocations in the social and economic environment, there
were also institutional factors at work. A study on the growth on federal intergovernmental aid conducted by the US
Advisory Commission on Intergovernmental Relations (ACIR) found grant generation to be primarily a governmental
insider’s game, with members of Congress the most responsible. The ACIR also noted the important dynamic of
interest group support for programs, more often evidenced in pr...
View Full Document