States have traditionally relied on taxes to finance the expansion of services, and most states have enacted broad-based income taxes which yield additional revenue without raising tax rates. Federal grant-in-aid and revenue sharing funds also increase a state's fiscal resources and relieve pressure for additional taxes. Revenue Sharing was intended to replace restricted grants-in-aid and permit state and local governments to receive federal funds pursuant to an allocation basis which rewarded state and local tax efforts. An unutilized provision of Revenue Sharing provides for the optional piggybacking of state income taxes upon the federal income tax. The Internal Revenue Service (IRS) would act as the state's collector and enforcer. The state, however, would lose some control, both legislatively and judicially, over its personal income tax laws. All judicial challenges, except those involving state constitutional questions or issues pertaining to the relationship between state and federal governments, would be tried in federal courts. Revenue Sharing is a five year experiment; piggybacking has no time limits and appears to have been envisioned by Congress as a long-term solution for state and local financial problems. Two or more states, accounting for at least five percent of the, taxpayers in the United States, must request federal collection of their individual income taxes before the Act can take effect. If the minimum number of states adopt piggybacking, the federal government will permit these states to utilize the national income base and relieve them of the excessive administrative costs of collecting an income tax. Because piggybacking could dramatically reshape a state's tax structure and provide long term stability, this Note will examine the fiscal and administrative feasibility of such a system.
Nicholas J. Letizia,
The Federal Collection of State Individual Income Taxes,
3 Fordham Urb. L.J. 579
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