variation--the smaller the coefficient, the closer the grouping around the aver age. The National Planning Association estimates that the coefficient of variation in the level of per capita income among States has declined from 23.0 percent in 1950 to 21.0 percent in 1960 and 20.4 percent in 1964, and will decline further to 17.0 percent by 1975 when per capita personal income for the Nation as a whole is projected at $3,406 (in 1964 dollars).7/ Income distribution is another important factor in the revenue raising potential of the States. State by State data from the 1960 Census of Population indicate significant diversity in the distribution of families by income size in 1959 (Table A-4). For the Nation as a whole, 21 percent of the families had annual incomes of less than $3,000 and 15 percent had incomes over $10,000; the comparable figures for Mississippi were 52 percent and 5 percent respectively. In general, the percentage of low income families is higher in the southern States than in the other regions. Nevertheless, as in the case of per capita incomes, the trend has been toward a gradual convergence in the interstate differentials. PERCENT DISTRIBUTION OF FAMILIES BY INCOME LEVEL, AND *1965 data from U.S. Department of Commerce, Bureau of the The relationship between State-local tax revenue and personal income is a rough measure of tax effort. By this measure, it is apparent that the more urbanized (higher income) States are exerting an increasingly greater tax effort (Table 10). The less urbanized (lower income) States actually experienced a decline in their relative tax effort. In part, this reflects the movement of lower income population groups from the rural to the urban areas of the Nation where they are frequently characterized as "high cost citizens." Significant Interstate Variations in the Use of Major Tax Sources Not only is there great diversity from State-to-State in the overall State-local tax effort, but there is also considerable interstate variation in the extent to which major tax sources are used. For particular tax sources, tax rates and bases are the prime determinants of the intensity with which a tax resource is exploited. State sales taxes.--Forty-four States now impose general sales taxes at rates ranging from 2 percent in 6 States to 6 percent in Pennsylvania. end of 1967, most States imposed a rate of 3 percent or more. Many of the States tax some kinds of services under their general sales tax laws in addition to the sale of tangible personal property. Among them are utility services, rental of rooms of transients, laundry, dry cleaning and repair services. Fourteen States, including four of the seven with the most recently enacted sales taxes, exempt food--an exemption which reduces sales tax yield by 15 to 20 percent. These States, together with their sales tax rates, are listed below. They include many of the States with the highest rates: Ohio; 1% in California and Texas; and up to 3% in New * Generally gross income after deduction of necessary business and trade costs. |