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Two other points are worthy of mention. First, net profits of public owned utilities and liquor stores are considered to be taxes. Profits are assumed to be in lieu of taxes usually imposed on private enterprises. Second, no constitutional, political or social constraints on tax policy are recognized. All resources generally taxable in several

states could be taxed if located in a state.

Finally, two areas of weaknesses in the SREB reports must be acknowledged. Personal income is not a fully appropriate proxy base for all of the property taxes--possibly for a maximum of two-thirds, the part that is actually a burden on jurisdictional residents. Second, personal income is not a fully appropriate proxy base for all of the corporation income taxes. Again, it seems perfectly appropriate for that portion not exported to nonresidents, but not for the total amount. Portions of wealth and corporation activity relative to export activities do not seem to be directly related to personal income attributed to the jurisdiction. A multiple proxy base would be more appropriate. Tax capacity is greater in these two areas as export is related to local activity for business firms. The extent to which relative capacities are disoriented

is uncertain.

Growth in Collections, Capacity and Underutilized Capacity

The nation's state-local tax collections are a composite from several sources in each of the 50 states and the District of Columbia. The level of collections results from a compromise between the perceived needs of government services and the capacity and willingness of the private sector to support public functions. Growth in the state and local taxation is a function of the growth in capacity and in the intens

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ity of use of the capacity. From 1961 to 1975, both the economic bases for taxation and the average rates applied against the bases increased.

State and local taxes increased by 266 percent while personal income increased by only 188.6 percent from 1961 to 1975. Taxes rose to $143.0 billion from $39.1 billion (Table 1). Personal income reached $1,195.9 billion, up from $414.4 billion. In 1961, taxes represented 9.4 percent of personal income, and in 1975, they equalled 12 percent. In constant dollars, state and local tax growth from 1961 to 1975 registered 71 percent (Table 2). While growth was substantial in current dollars in the last three years of the period, there was a mere 2.5 percent increase in constant dollar collections. In the last year, 1974 to 1975, there was a constant dollar decrease of 1 percent.

Tables 1 and 2 data indicate that taxes grew unevenly in the nation's regions. In general, taxation in the traditionally low-tax states

increased more rapidly than in the high-tax states.

Southern states,

especially demonstrated impressive growth. In constant dollars, the New England, Middle Atlantic and North Central regions actually showed a decline in tax collections from 1972 to 1975, while considerable growth is evident in the Southern and Mountain regions.

An almost identical analysis can be made for tax capacity (potential) growth and its distribution (see Tables 3 and 4). In current dollars, growth was substantial throughout the period, but most of the growth is attributed to inflation after 1972. Constant dollar growth

was substantial through the 1960's decade and up to 1972, but leveled The one thing that is certain from available statistics

off thereafter.

is that the quality and quantity of per capita public services financed

*1967-100. The District is not included in previous years.

*1970-100. The District is not included in previous years.

TABLE 3