ECONOMIC

It is interesting to note that after rising by 24 percent from 1971 to 1972the increase in personal tax and nontax receipts of State and local governmentswas halved from 1972 to 1973, even though increases in personal incomewere slightly larger in the latter period. General revenue sharingmay well have contributed to this change.The new program has also allowed a number of long delayed but highpriority projects for capital improvement and construction by State andlocal governments. A 3-year decline in real public construction outlaysstopped last year. More recently, general revenue sharing funds have beenrelied upon more and more to meet the current operating costs of humanresource and economic development programs, primarily in public education,public safety and health, as well as in environmental protection, conservation,and public transportation. In sum, the financial stability, vitality, andindependence of State and local governments has been increased noticeablyby the general revenue sharing program.FEDERAL RECEIPTSFederal receipts (NIA) grew from $229 billion in calendar 1972 to $265billion in calendar 1973 (Table 16). The 16 percent increase was twicethe rate of growth of expenditures. Little more than one-fourth of thisincrease can be attributed to a change in tax rates or in tax structure. Forthe most part, receipts grew automatically because of the increase in thevarious tax bases provided by the real growth of GNP and by inflation.Compared to the January 1973 NIA estimates, personal tax and nontaxreceipts turned out to be higher in 1973, partly because the acceleratedinflation affected personal incomes and partly because individuals permittedtheir Federal income taxes to be overwithheld at the same rateas they had in 1972. The projection of NIA receipts at the start of last yearassumed that individuals would reduce their withheld taxes in order to bringabout a closer balance between 1973 withholdings and 1973 tax liabilities.The estimated reduction of $3.5 billion did not materialize. Corporate profitstax accruals were more than $7 billion higher than had been anticipated atthe start of the year. The rise in these taxes was due largely to the sharpincrease in book profits produced by unexpectedly high rates of priceinflation.The only major discretionary change affecting 1973 receipts occurred insocial security (OASDHI) taxes. Social security includes old age, survivors,disability, hospital, and supplementary medical insurance and accounts formost of the Federal receipts included in contributions for social insurance.At the start of 1973 the combined rate for employers and employees wasraised from 10.4 percent to 11.7 percent of earnings. Simultaneously themaximum amount of annual earnings subject to the tax was increased from$9,000 to $10,800. These two measures together raised OASDHI tax receiptsby $10 billion and thus accounted for over one-quarter of the $37 billionrise in total Federal receipts from 1972 to 1973. Including the automatic527-867 O - 74 - 677