THE INCOME TAX AS A LOCAL REVENUE

Abstract

The discussion of the income tax as a local revenue suggests merely one phase of the problem of local government and its financing. What functions should our local governments perform? How should they be organized to carry on those functions? What revenues should they have available to finance their activities? These are some of the fundamental questions to which this discussion should be related. Local government expenditures have tended to increase through the centuries in spite of all efforts to hold back the tide. The growth in population, the greater demand for public services, financial mismanagement, and other factors have contributed to the rising expenditures. On the revenue side, our local governments have been rather narrowly restricted to property taxation for their major revenues, a source which is inevitably exhausted. The financial, economic, political, and social problems of our cities and other units of local government have been the occasion for endless debate. Many observers think we have had too many words and too little action. The slums and blighted areas of our mature Eastern cities, the movement of population into and away from our cities, the high cost of city government in relation to financial resources, and the critical financial and other problems of our cities have caused much concern and some action to remedy the recent maladjustments. In the main, however, the approach to the problems of local government has been a patchwork affair, with primary consideration for immediate needs. Everywhere one finds a search for new local government revenues to relieve the distress of local finances in this postwar period of rising costs. In Pennsylvania the last legislature extended to local governments generally the privilege that had been given to Philadelphia in 1932 to impose such taxes as are not levied by the State, subject to the limitation, however, that the revenues raised from new taxes may not exceed the revenues obtained from real estate. Governor Duff has bluntly advised local governments that they must find new local revenues for education and other func-