State-Local Revenue System
ROBERT J. CLINE
Just as beauty is in the eye of the beholder, the vision of a high‐ quality tax system is constantly being reshaped by changing social and political values. This truism is clearly underscored by tracing the changes in the emphasis that the Advisory Commission on Intergovernmental Relations (ACIR) has placed on significant characteristics of a high-quality state-local revenue system. 1 Over the past fifteen years, the ACIR has published a number of studies examining the significant features of state-local revenue systems. On the basis of this work, a "model" evolved for identifying the characteristics of a high-quality state-local tax system. The purpose of this essay is to reexamine these characteristics in light of the shift from a fast-growth to a slow-growth era of state-local finance. Table 1 provides a concise summary of the differences in the "old" view (1960s and early 1970s) and the "new" view (since late 1970s) of the characteristics of a high-quality state-local tax system.
In general, the earlier, fast-growth-era model focused attention on the characteristics necessary to guarantee a productive and equitable state-local tax system. It emphasized a balanced use of the "Big 3"—income, sales, and property taxes—and the adoption of various safeguards to insulate low-income taxpayers from excessive tax burdens. The combination of responsive tax bases and equity safeguards provided the means for policymakers to "maximize revenues while minimizing squawks."
This ACIR view of a high-quality tax system was the product of the "go-go," fast-growth era from 1960 to 1975. During this period, the state and local sector increased its share of gross national product from 9.8 to 15 percent. This rapid expansion was fueled by strong, real economic growth, demographic trends,____________________