A senior Treasury Department official said yesterday that the Reagan administration has "already substantially accomplished" all it can to make new tax sources available to state and local governments, as President Reagan has periodically promised to do.
Norman Ture, the Treasury undersecretary for tax and economic affairs, said the administration had given the states and local jurisdictions this extra taxing room through last summer's federal income tax cut that he said would provide "an average per-state turnback" of $2.24 billion when fully effective in 1984.
Ture's declaration that "we can't do much more than that" to help states and localities finance federal programs being turned over to them drew expressions of astonishment and protest from members of Congress, state legislatures, county and city governments who met as the "revenue source return subcommittee" of Reagan's advisory committee on federalism.
Richard S. Williamson, Reagan's assistant for intergovernmental relations, had opened the meeting with a long list of questions about the desirability of earmarking the proceeds of various federal taxes for state-local governments or turning those tax sources over to the states and localities. Reagan has long promised to turn back both program responsibilities and the revenue sources to sustain them.
But Ture, who would help draft any legislation the administration offered in this area, put a twist on the discussion by saying that the alternative to "returning specific revenue sources" is for the federal government to "preempt less of the revenue resources." That alternative, he said, "has already been substantially accomplished" by the three-year, 25-percent tax cut passed last summer.
He conceded that state and local officials who had to raise taxes to finance programs the federal government is dropping would not be in "an enviable position" in the short run, but insisted that "true federalism" required that the same unit of government collect the taxes as spent the money.
That triggered a wave of protests. Benjamin L. Cardin, the Democratic speaker of the Maryland House of Delegates, said that the federal tax cuts were being made to "reduce taxation, not to shift taxes to state and local governments." Indianapolis Mayor William H. Hudnut III, a Republican, said that constitutional limits on local taxes made it "difficult, if not impossible" for many cities to do what Ture was suggesting.
They and several others of both parties argued strongly against the administration's proposed 12 percent cutback in general revenue sharing with the states and cities. Rep. Clarence Brown (R-Ohio) said that reduction in the no-strings federal aid program is "absolutely inconsistent" with the president's professed desire to return authority to localities.
But Ture argued that "any kind of revenue-sharing--whatever form it takes--interferes with the efficiency and rationality of decisions made when the same unit does the taxing and spending."
Sen. David Durenberger (R-Minn.) said, "I strongly disagree," because the federal tax system offers "a much fairer way" to collect and redistribute revenues.
Cardin asked Ture what he would do about financing services "in a jurisdiction that has one-fourth the fiscal resources of the neighboring jurisdiction?"
"You don't do anything," Ture said. "You decide where you want to live."
Williamson told reporters after the session that the commission would meet again to frame recommendations but said it was "hard to speculate" whether the 1983 budget would contain any revenue-return measures. "The president would like to have something we can point to, something that goes beyond what Norm says we have done. Remember," he said, "Norm Ture is expressing Norm Ture's point of view."