The Corner

Is Federalism Dead?

Maybe. According to USA Today, in the first three months of 2009, federal payouts have become the biggest source of revenue for states.

The sales tax had been the No. 1 source of state and local revenue since the mid-1970s, according to the Bureau of Economic Analysis. Before that, property taxes were the primary source. That changed in the first three months of 2009.

Federal grants — early stimulus money plus conventional federal aid — soared 15% in the first quarter to a seasonally adjusted annual rate of $437 billion, eclipsing sales taxes, which fell 2%.

The dominance of federal money is set to expand dramatically this year because tax collections are sinking while the bulk of federal stimulus aid is just starting to arrive. “This money isn’t manna from heaven. It comes with a price,” says Indiana state Sen. Jim Buck, a Republican. He worries that the federal money will leave states under greater federal control and burden future generations with debt.

Read the whole thing here.

Also, check out this interesting chart by the Heritage Foundation called “Tracking the State of Dependancy Rate.” 

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