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Local Taxes and Local Expenditures: Strengthening the Wicksellian Connection

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  • Richard M. Bird

    (University of Toronto)

  • Enid Slack

    (University of Toronto)

Abstract

One way to design a local tax system is to determine the desired size and nature of local expenditures and then put in place a tax (and transfer) system providing incentives that lead local decision-makers to choose to finance that expenditure package. In practice, however, there are seldom clear links between local taxes and local expenditures and accountability at the local level is often both confused and confusing. This paper discusses how the Wicksellian connection between local services and revenues might be strengthened by changing the ‘package’ of local services, by altering the ‘package’ of local revenues, and by altering the way in which the two packages are tied together, although it considers in depth only the second of these points. The potential importance of this issue is illustrated by a brief review of an on-going discussion about how to finance the regional public transit system in Toronto, Canada. We conclude that, although advances in technology may make an economically more rational local finance system achievable, it is unclear that people (or politicians) are willing to face the economic realities of local finance.

Suggested Citation

  • Richard M. Bird & Enid Slack, 2013. "Local Taxes and Local Expenditures: Strengthening the Wicksellian Connection," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1323, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    • Handle: RePEc:ays:ispwps:paper1323
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    File URL: http://icepp.gsu.edu/files/2015/03/ispwp1323.pdf
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    References listed on IDEAS

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    7. Richard M. Bird, 2011. "Are There Trends in Local Finance? A Cautionary Note on Comparative Studies and Normative Models of Local Government Finance," IMFG Papers 01, University of Toronto, Institute on Municipal Finance and Governance.
    8. Wallace E. Oates & Wallace E. Oates, 2004. "An Essay on Fiscal Federalism," Chapters, in: Environmental Policy and Fiscal Federalism, chapter 22, pages 384-414, Edward Elgar Publishing.
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    Cited by:

    1. Richard M. Bird, 2014. "Global Taxes and International Taxation: Mirage and Reality," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1429, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    2. Agnese Sacchi & Simone Salotti, 2017. "The influence of decentralized taxes and intergovernmental grants on local spending volatility," Regional Studies, Taylor & Francis Journals, vol. 51(4), pages 507-522, April.
    3. Michael Fenn & André Côté, 2014. "Provincial-Municipal Relations in Ontario: Approaching an Inflection Point," IMFG Papers 17, University of Toronto, Institute on Municipal Finance and Governance.
    4. Richard M. Bird, 2014. "A Better Local Business Tax: The BVT," IMFG Papers 18, University of Toronto, Institute on Municipal Finance and Governance.

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