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‘‘Which Tax’’ or ‘‘Which Tax for What?’’: Tax Assignment in the Theory of Fiscal Federalism


  • Paolo Liberati

    (Dipartimento di Economia, Università Roma Tre, Rome, Italy,


What is the power of traditional and competitive theories of fiscal federalism in explaining tax assignment at a local level? This article deals with this issue, arguing that both theories fail to properly explain the practice of tax assignment across countries. The author shows that the inapplicability of local benefit taxes makes the theory of tax assignment both under- and overdetermined in the framework of the traditional theory where the public sector is a benevolent player. The author also shows that the politicians’ misconduct that is emphasized by competitive theories of fiscal federalism would lead toward earmarking local taxes, if the aim is to enforce responsibility, a feature that is not widely observed in practice. It is therefore argued that alternative lines of research must be addressed to rationalize the practice of tax assignment.

Suggested Citation

  • Paolo Liberati, 2011. "‘‘Which Tax’’ or ‘‘Which Tax for What?’’: Tax Assignment in the Theory of Fiscal Federalism," Public Finance Review, , vol. 39(3), pages 365-392, May.
  • Handle: RePEc:sae:pubfin:v:39:y:2011:i:3:p:365-392

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    Cited by:

    1. Liberati, Paolo & Paradiso, Massimo, 2012. "Teoria positiva del beneficio e finanza locale responsabile: il contributo di Sergio Steve
      [The positive character of the benefit theory of taxation and accountable local public finance: the though
      ," MPRA Paper 43671, University Library of Munich, Germany.
    2. Fabio Fiorillo & Agnese Sacchi, 2011. "Free-riding or Internalizing? An Opportunistic View on Decentralization versus Centralization," CESifo Working Paper Series 3328, CESifo Group Munich.
    3. Agnese Sacchi & Simone Salotti, 2016. "A Comprehensive Analysis of Expenditure Decentralization and of the Composition of Local Public Spending," Regional Studies, Taylor & Francis Journals, vol. 50(1), pages 93-109, January.
    4. Sacchi, Agnese & Salotti, Simone, 2014. "The asymmetric nature of fiscal decentralization: theory and practice," MPRA Paper 54506, University Library of Munich, Germany.


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