State and Local Fiscal Policy

State and Local Fiscal Policy

Thinking Outside the Box?

Studies in Fiscal Federalism and State–local Finance series

Edited by Sally Wallace

In this broad and illuminating work, experts on public finance discuss innovations in state and local tax policy that have been implemented or considered over the course of the last three decades. The authors provide original work that analyzes whether state and local governments have ‘gone outside the box’ to deal with the strains of current public finances or have gotten along by adhering to the status quo. This book provides researchers, students and policy makers with evaluations and analyses by well-known scholars in the area of state and local public finance of actual practices and analysis of potential policy changes for the future.

Chapter 9: Fiscal Limitations on Local Choice: The Imposition and Effects of Local Government Tax and Expenditure Limitations

Daniel R Mullins

Subjects: economics and finance, public finance, public sector economics, politics and public policy, public policy


Daniel R. Mullins INTRODUCTION Of the 89,528 units of government in the United States, all but one are subnational and 89,476 are local (see Table 9.1). These governments are the first line of representation and service delivery for all citizens of the nation. They deliver autonomous basic services and coordinate joint services and policy across all levels of government. These jurisdictions provide the critical foundations for economic activity, education, and cultural and social development. They respond to and reflect the subsets of desires of populations with differing tastes, capacities and needs for public services. Essential to the successful completion of their functions is discretion over service levels and packages, and the authority to raise revenue in a manner which effectively exploits their fiscal capacity consistently with the desires of their local populations. This discretion must obviously be limited to assure proper coordination with the policy objectives of overlying governments; however, beyond this there is little justification for policies which constrain the ability of these jurisdictions to respond to the demands of their populations. The ability of local (and state) jurisdictions to serve the wants and needs of their populations in the United States has come under increasing strain over the past few decades for reasons that appear to defy rational explanation and which have contributed to distortions in their fiscal, service delivery and governance structures. The subtlety of these changes belie their importance in shaping the ability of the sector to respond to and meet the varied needs...

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