State of the States

Pressed down by the biggest Federal tax load in history, many a U.S. citizen has been looking hopefully for tax relief from the states, such as was granted by New York and South Dakota on 1941 incomes.* Last week, although New York's Governor-elect Thomas E. Dewey hinted he might make some further tax reductions, a meeting of the Tax Institute of the Wharton School of Finance and Commerce sounded a note of warning against too much optimism.

Due to much higher revenues from income and sales taxes most state finances are in better shape than in years, with some 13 states showing surpluses, including New York, Illinois, California, Mississippi, Ohio. But: 1) The large increase in these collections is about passed since the national income at present prices is close to its potential peak. 2) States face radical reductions in their collections from gasoline taxes, which constituted about 24% of total revenues for the first eight months in 1942. In 1943 these will be off at least 35%. 3) Unless the whole burden of postwar spending is to be thrown on the federal government (thus aiding and abetting the drift towards centralization) the states must play their parts. The current boom is the time for them to prepare.

*25% in New York, 30-40% in South Dakota.

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