It's a historic first -- and a very, very bad one at that.
USA Today reports
[...] Uncle Sam has supplanted sales, property and income taxes
as the biggest source of revenue for state and local governments.
The shift shows how deeply the recession is cutting. Federal
stimulus money aimed at reviving the economy and a sharp drop
in tax collections have altered, at least temporarily, the
traditional balance of how states, cities, counties and schools
pay for their operations.
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. [...]
And then there's the inflation that is to come.
