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and National Bureau of Economic Research Corporate Taxation i n t he United States THE CORPORATION INCOME TAX has been the focus of much criticism and debate in the United States during the past decade. Many hold it responsible for the low level of business investment in the United States, and it has been criticized as a fundamentally unfair and illogical tax because it taxes corporations as independent entities, regardless of the tax brackets of individual shareholders. Much of the academic discussion in the 1970s about reform of the corporate tax centered on the integration of corporate and individual income taxes, to make the corporate tax essentially a withholding mechanism for the individual income tax.' More recently the emphasis has shifted toward reform by repeal, and indeed President Reagan himself has called for the abolition of the corporate tax. Any analysis of the current economic effects of the U.S. corporate tax should begin with the recognition of what has happened over the years to corporate tax revenues. Put simply, the corporate tax has been disappearing. The marked drift in composition of federal revenues away I am grateful to James Hines and David Reishus for able research assistance, to Don Fullerton for providing unpublished data, to them and to Henry Aaron, Harvey Galper, Mervyn King, Emil Sunley, Alvin Warren, and members of the Brookings Panel for comments on early drafts, and to the Sloan Foundation for financial support through a Sloan Research Fellowship. The views expressed herein should not be attributed to any organization with which I am associated.

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Rapid technological advances and upward pressure on wages of hospital personnel are leading to a steady increase in health care spending that is absorbing an ever-larger fraction of gross national product. Eliminating inefficiencies in the system can provide brief fiscal relief, but rationing of beneficial services, even to the well-insured, offers the only prospect for sustained reduction in the growth of health care spending. The United States, which has negligible direct experience with rationing, can learn about choices it will face from the experience of Great Britain where health care has been rationed explicitly for many years.

An Econometric Examination of t he New Federalism PRESIDENT REAGAN unveiled a set of proposals in February 1982 for fundamentally altering U.S. federal-state fiscal relations. He first proposed a massive program "swap" whereby the federal government would take over sole responsibility for the large and rapidly growing medicaid program and the states would assume sole responsibility for the main U. S. income support programs-food stamps and aid to families with dependent children (AFDC). He also proposed various ways to loosen strings heretofore accompanying categorical grants-many grants would be converted from categorical to block-grant form (continuing a trend begun a decade earlier in the Nixon administration), and many categorical and block grants would then be placed in a trust fund, the financial responsibility for which would eventually revert to state governments. Finally, he proposed rather sharp cutbacks in all forms of intergovernmental aid, cutbacks that would normally be front page news but in fact were upstaged by the more fundamental structural proposals. In this paper I try to construct an analytical framework for evaluating I owe a special debt of gratitude to Deborah S. Laren for working out some rather complex data processing schemes and to Judith Jackson for typing the paper on a stillevolving text-edit routine, both with a great deal of skill under the pressure of a time constraint. Patrick Driessen, Sharon Gennis, and Marieka Klawitter also provided able assistance gathering and processing data. Richard A. Kasten generously supplied some of the data. Many ideas surfaced when I presented an early version of this paper at the University of Michigan's public finance workshop, and many more when I circulated a draft to the editors and discussants of the Brookings Panel. Harvey Galper, Helen F.