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Strength in diversity? Fiscal federalism among the fifty U.S. states

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Fiscal federalism in the United States has a distinctive structure that contrasts sharply with that in most other industrialized nations. Our purpose in this paper is to describe and explore the U.S. “brand” of fiscal federalism. We demonstrate that there is a striking amount of variety in the 50 state fiscal systems and that these differences have prevailed in the face of potentially disruptive forces. The variety we find stems in large part from states having meaningful fiscal autonomy, in particular, the authority to levy taxes. The result is likely higher societal welfare than would ensue without this autonomy.

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  • Teresa Garcia-Milà & Therese J. McGuire & Wallace E. Oates, 2017. "Strength in diversity? Fiscal federalism among the fifty U.S. states," Economics Working Papers 1586, Department of Economics and Business, Universitat Pompeu Fabra.
    • Handle: RePEc:upf:upfgen:1586
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    1. Teresa Garcia-Milà & Therese J. McGuire, 2018. "When theory meets practice: can we implement the optimal fiscal federal structure?," Economics Working Papers 1663, Department of Economics and Business, Universitat Pompeu Fabra, revised Jul 2019.
    2. Sijbren Cnossen, 2022. "The C-inefficiency of the EU-VAT and what can be done about it," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 29(1), pages 215-236, February.

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    Keywords

    Fiscal federalism; fifty U.S. states;

    JEL classification:

    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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