The Drunken Pyramid

While Washington debates a federal tax increase, the inescapable fact is that some taxes are already on the rise. State and local taxes are growing by 9% a year, or almost twice as fast as the na tional income. On a per capita basis that counts infants and indigents, the tax bill averages out to $916 -- $53 more than last year -- and $303 of it is siphoned off by states, counties, cities and towns.

Hardly a week goes by without further increases. Last week alone:

-- New York City Mayor John Lindsay's aides outlined a proposal for a graduated city income tax that could come to about 50% as much as the state income tax. If adopted, the measure would mean that a man who earns a taxable net income of $15,000 in New York City would have to pay $417.50 to the city in addition to $835 to the state and $3,010 to the Federal Government--even if he lives in New Jersey or Connecticut. -- Chicago School Board Member James W. Clement proposed a 1% city income tax to provide $115 million, mostly for education. (Ten cities now have income taxes, including Philadelphia, Pittsburgh, St. Louis and Cincinnati.)

-- Massachusetts Governor John A. Volpe, after six defeats, pushed through a 3% sales tax to raise $203 million to cover a budget deficit and improve education.

-- Virginia prepared to enforce a 2% sales tax approved earlier.

-- New Jersey Governor Richard J. Hughes prodded legislators to approve a new income tax to raise at least $180 million, lift that wealthy state above its current low rank (48th) in allotments for schools, roads and welfare.

Standbys & Sewers. The tax-and-spend spree has been touched off by population growth and urbanization (see THE NATION), and the rising demand for services. Of the $75 billion spent in a year by states and localities, about 17% went for roads, 10% for welfare, 41% for schools. One-third of the money came from bond issues and federal grants, the rest from taxes. Of the 47 state legislatures in session last year, 32 approved tax increases.

States and localities are concocting all sorts of ways to raise money. In addition to those old stand-bys--taxes on whisky, cigarettes and gasoline--they are slapping taxes onto restaurant meals, hotel rooms, commercial occupancy, utility bills, stock transfers and on the use of sewers. Last week, testifying before a House Judiciary subcommittee that is trying to write sensible guidelines for such taxes, Caloric Corp. Vice President Werner N. Davidson complained: "Today the overlapping state, county, city and school-district tax structure reminds me of a pyramid built by drunken Egyptians."

More from Less. One suggested way to realign the design would be for cities and suburbs to combine their spending and tax collecting, for the sake of efficiency and economy. States could also raise more revenue with less pain if they abandoned most nuisance taxes in favor of income taxes, which grow along with the economy, and they could lower sales taxes by reducing the number of exempted goods, such as food and drugs. Economists reckon that with such changes the states last year could have increased their sales-and incometax revenues by $5 billion. Of course, the states and localities could always cut away some nonessential spending--but more and more things seem to be essential these days.

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