Revenue Sharing

AuthorDennis J. Mahoney
Pages2226-2227

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One consequence of the massive increase in the size and power of the federal government that began in the 1930s

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was the preemption by the federal government of the sources of revenue that had previously supported the state and local governments. The inability of such governments to find adequate stable sources of income seemed to pose grave problems for American FEDERALISM.

Funds appropriated by the federal government already flowed to state and local governments in the form of FEDERAL GRANTS-IN-AID, often with the effect of coopting those governments as administrators of federally mandated programs. The federal grants brought with them various restrictions as well as burdensome paperwork requirements.

One solution was to return to the state and local governments a share of the tax revenues collected by the federal government, not in support of particular federal programs but as general revenue to be spent for local purposes, with a minimum of restrictions. In the late 1960s, the idea of general revenue sharing was adopted by the Republican party as part of its proposal for a "new federalism." In 1972, Congress, at the urging of President RICHARD M. NIXON, enacted the State and Local Fiscal Assistance Act. The act authorized the distribution of $30 billion to state and local governments over a five-year period. Of that sum, one-third was allocated to the states and two-thirds to counties, cities, and other local governments to be distributed according to a flexible formula taking into account population, locally generated revenues, and other...

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