| Sumario: | Numerous suggestions have been made for increasing Federal Government assistance to the states in different ways in dealing with pressing domestic welfare and developmental programs. At the same time, many drawbacks and disadvantages of each of these alternatives have been identified, with the result that no single approach has obtained general support. The purpose of this article is to contribute to breaking the deadlock by arraying and objectively comparing the various alternative approaches to what might be described as a revised fiscal federalism. Hence, this study of the policy mix of federal aid to state and local governments attempts to achieve two objectives: (1) to examine the case for increased federal financial assistance to state governments and their subdivisions; and (2) to analyze as objectively as possible the major alternative ways of distributing the aid. The foregoing analysis does not come up with a clear-cut answer as to which single federal aid approach is most desirable. Block grants with an equalization feature yield the greatest amount of income redistribution in favor of the low-income areas. However, tax credits and tax sharing, on the basis of the recent allocation patterns of state budgets, might tend to result in larger expenditures for welfare, health, and similar investments in human capital with an especial emphasis on the groups at the lowest end of the income class distribution.
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