Academic journal article Public Finance and Management

Symposium on Local Taxation

Academic journal article Public Finance and Management

Symposium on Local Taxation

Article excerpt

ABSTRACT

This symposium focuses on issues in local taxation. Throughout this issue, the term "local government" will refer to any governmental unit that is lower in authority than the central or national government. While national and international events often drive media coverage and public policy debates, local governments are responsible for providing many of our essential day-to-day services and generate a sizable portion of total government revenue. This special issue is comprised of four excellent articles on various aspects of local government taxation.

INTRODUCTION TO THE SYMPOSUIM

It is my pleasure to introduce you to Public Finance and Management's Symposium on issues in local taxation. From the ongoing sovereign debt crisis in the European Union to the debt-ceiling and corresponding Budget Control Act of 2011 in the United States, national and international issues and recent calls for austerity have set much of the agenda and tone for recent public poli-cy debates, which makes it easy to overlook the important role that local gov-ernments play in our lives. This Symposium is comprised of four excellent articles that investigate various aspects of local government taxation.

Throughout this special issue, the term "local government" will refer to any governmental unit that is lower in authority than the central or national government. Hence, there is considerable variation both across and within countries with regard to the size, structure, role, authorities, and capacity of local governments. In the United States and European Union for instance, which account for nearly 12% of the world's population and around 45% of world GDP, there are easily more than 100,000 local governmental units. France alone has approximately 36,000 "communes" for a population of 65 million people, which is one local government for every 1085 persons. In the United States, if one excludes school districts and single-function "special dis-tricts", then there are more than 21,000 local government units to serve a pop-ulation of 300 million.

In addition to being the level of the government that is often cited as being "closest to the people" because of the low citizen-to-official ratio, local governments around the world provide many of the essential day-to-day services such as education, waste collection, police and fire protection, water, and, to a lesser extent, transportation. While local governments typically receive a sig-nificant amount of funding from either grants provided by higher levels of government or though shared taxes, own-source taxation remains a vital source of revenue. Professor Richard Wagner, author of "The Institutional Framework for Shared Consumption: Deemphasizing Taxation in the Theory of Public Finance", challenges the conventional wisdom that taxation must be the primary instrument for generating revenues, arguing instead that this view of public finance is neither historically accurate nor theoretically necessary. In fact, Professor Wagner argues that taxation as a means of generating revenue is the result of the Samuelsonian framework of public goods and the resulting institutions rather than of the specific goods and services that governments provide.

Wagner develops his argument by drawing on differences in the views of taxation as a means of public finance between the cameralists and mercantil-ists. The mercantilist view, which is the dominant view of public finance today and the one held by Adam Smith, treated taxation as the primary means of generating revenue for the public sector. In contrast, the cameralist perspective viewed taxation as a secondary source of generating revenue, with user fees and charges serving as the principal revenue sources. In essence, the cameral-ist orientation was one in which the prince (or government) is entrepreneurial and revenue is generated primarily through the provision of goods and ser-vices rather than through direct taxation. …

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