Stephen Calabrese

Local Government Fiscal Structure and Metropolitan Consolidation

The United States has an enormous number of local governments. Even when the focus is limited to municipalities, as it is in this paper, the number is impressive. There were 19,372 municipalities in the United States in 1997. Most large metropolitan areas in the United States are divided into a hundred or more distinct municipalities. Even metropolitan areas of moderate size typically have fifty or more distinct municipalities. For much of the twentieth century, there appears to have been a relatively broad consensus reaching across disciplines that this multiplicity of local governments was undesirable—a manifestation of disorganization and a prescription for inefficiency in the provision of public services. This consensus spawned a metropolitan government movement that met with little success and much resistance. At about the same time the political movement for metropolitan government was beginning to run out of steam, the intellectual underpinnings also came under challenge––thanks largely to the work of Tiebout, and Ostrom, Tiebout, and Warren. The trade-offs between the benefits of decentralized choice and the potential gains from coordination have been the subject of debate ever since. The lack of popular support for consolidation of metropolitan governments is mirrored in data affirming the permanence of municipalities. Municipal

Local Redistribution Financed by Income Tax

In this article, a positive model of local income redistribution financed by income tax is developed. The tax rate and the level of redistribution within a community are determined through majority voting. The amount of redistribution that each local government can undertake is constrained by housing market distortions and by the ability of people to freely move from one jurisdiction to another. The author establishes a number of equilibrium conditions with a general form of the utility function. The three different sets of numerically computed equilibria are developed. The first set of computational equilibria is developed assuming voters are less sophisticated. These results are compared with the results of the property tax-financed redistribution-computed equilibria in Epple and Romer’s study. The second set of computational equilibria are developed assuming voters are highly sophisticated. The third set are developed assuming that land rents are equally divided among the entire population.

Majority Voting over Publicly Provided Goods, Redistribution, and Income Taxation

Federal, state, and many local governments make decisions that involve taxation, redistribution, and provision of public goods. Positive models to study these issues encounter the well-known problem that majority-voting equilibrium (MVE) may fail to exist in such multidimensional models. In this paper, with reasonable restrictions on preferences, I provide sufficient conditions for the existence of an MVE in a model with linear income tax and government expenditure policies that affect individual labor/leisure choices. My majority-voting result takes account of the possibility that low-skill individuals will drop out of the labor force under some tax and expenditure configurations.