revenues were yielding $12,535,815 in 1934-35 for relief purposes.18
The states, therefore, derived a large part of their revenue from essentially regressive taxation and defeated the progressive element of taxation, so far as relief expenditures were concerned, by borrowing. In these respects their financial policies were similar to those of the Federal Government. Nevertheless borrowing appears to have declined as a source of revenue in the latter years of the depression, and sales taxes did not increase as a source after 1935. These later trends may be attributed to the improvement in economic conditions, which relieved state governments of pressure to secure relief funds.
In the preceding pages it has been indicated that the need principle was defeated under the FERA, and that the way was thus prepared for definite acceptance of the ability principle under the WPA and the Social Security Act. Expenditures were limited, funds were distributed according to ability, and local and individual responsibility were emphasized. The ability principle is characterized by these policies.
There were numerous reasons for the failure in practice of the need principle, but the main causes were that public opinion generally opposed the need principle and that relief administrators reacted to public sentiment. Funds were distributed without strict relation to need, and the sources from which the funds were derived became more regressive in character. Wealthy states could avoid the operation of the need principle in two ways: first, by securing more than their share of the____________________