IDEAS home Printed from https://ideas.repec.org/p/oec/ecoaaa/462-en.html
   My bibliography  Save this paper

Fiscal Relations Across Levels of Government in the United States

Author

Listed:
  • Thomas Laubach

Abstract

This paper discusses the current state of fiscal relations between the federal, state and local governments in the United States and suggests directions for improvement. The significant degree of fiscal autonomy of the states and, to a lesser extent, of local governments has had several beneficial effects, including the responsiveness of public expenditure to local preferences and the comparatively high degree of accountability through the close link between revenue-raising powers and expenditure assignments. This link reflects traditionally weak support for redistribution across jurisdictions. Grants from the federal to sub-national governments are focused on achieving aims of an efficiency or paternalistic nature and are therefore all earmarked. Programme devolution to the states, notably in the welfare area, has been remarkably successful in fostering innovation in programme design, but the cost pressures in health care for the indigent are such that greater federal involvement might become necessary. The efficiency with which states raise revenues has been compromised by the erosion of their tax bases, notably for corporate income and sales taxes. Replacing these taxes with a less distorting form of indirect taxation could reverse this trend. Finally, state balanced budget requirements appear to have had salutary effects, but more extreme forms of fiscal rules have reduced state and local governments' ability to provide the desired level of public goods. This Working Paper relates to the 2005 OECD Economic Survey of the United States (www.oecd.org/eco/surveys/us). Les relations budgétaires entre les différents niveaux d'administration aux États-Unis On fera le point dans cet article sur les relations budgétaires entre l’État fédéral, les États fédérés et les collectivités locales tout en examinant les mesures qui pourraient être prises pour améliorer ces relations. La large autonomie budgétaire des États et, dans une moindre mesure, des collectivités locales, a eu plusieurs effets bénéfiques, en particulier la réactivité des dépenses publiques aux préférences locales et une responsabilité relativement étendue du fait du lien étroit entre les prérogatives fiscales et les obligations de dépenses. Ce lien reflète traditionnellement le faible rôle de la redistribution entre les collectivités territoriales. Les subventions fédérales aux administrations infranationales sont accordées en fonction d’objectifs d’efficience ou de préoccupations à caractère paternaliste et sont donc toujours préaffectées. La décentralisation des programmes au niveau des États, en particulier pour la protection sociale, s’est révélée très fructueuse en favorisant l’innovation dans la conception des mesures, mais les coûts sont tels pour les soins de santé en faveur des catégories défavorisées qu’une plus forte participation fédérale pourrait être nécessaire. L’érosion des bases d’imposition, notamment pour l’impôt sur les sociétés et pour la taxe sur les ventes, compromet une collecte efficiente des recettes des États. On pourrait inverser cette tendance en substituant à ces impôts une forme de taxation indirecte qui créerait moins de distorsions. Enfin, l’obligation d’équilibre budgétaire au niveau des États paraît avoir été salutaire, mais les règles de discipline budgétaire sous leurs formes les plus extrêmes ont entravé la fourniture, par les États et les collectivités locales Ce document de travail se rapporte à l'Étude économique de l'OCDE des États-Unis 2005 (www.oecd.org/eco/etudes/us).

Suggested Citation

  • Thomas Laubach, 2005. "Fiscal Relations Across Levels of Government in the United States," OECD Economics Department Working Papers 462, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:462-en
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1787/685856031230
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hansjörg Blöchliger & José Maria Pinero Campos, 2011. "Tax Competition Between Sub-Central Governments," OECD Economics Department Working Papers 872, OECD Publishing.
    2. Vladimir Gligorov & Adalbert Knöbl & Maciej Krzak, 2006. "Monthly Report No. 4/2006," wiiw Monthly Reports 2006-04, The Vienna Institute for International Economic Studies, wiiw.
    3. Beata Guziejewska, 2014. "Intergovernmental Fiscal Relations. Theoretical Aspects And Poland’S Experience," "e-Finanse", University of Information Technology and Management, Institute of Financial Research and Analysis, vol. 9(3), pages 24-32, January.
    4. Hansjörg Blöchliger & Claire Charbit, 2008. "Fiscal equalisation," OECD Journal: Economic Studies, OECD Publishing, vol. 2008(1), pages 1-22.
    5. P. Butzen & S. Cheliout & H. Geeroms, 2014. "Lessons from the US for the institutional design of EMU," Economic Review, National Bank of Belgium, issue ii, pages 82-101, September.

    More about this item

    Keywords

    balanced budget requirements; fiscal federalism; fiscal rules; fédéralisme budgétaire; grants; impôts des Etats et des collectivités locales; Medicaid; Medicaid; obligation d'équilibre budgétaire; plafonds d'impôts et de dépenses; règles de discipline budgétaire; réforme de la protection sociale; state and local taxes; subvention; tax and expenditure limitations; welfare reform;

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oec:ecoaaa:462-en. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://edirc.repec.org/data/edoecfr.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.