Ideal Financing for Local Government

Abstract

Local government, following a legitimate remit and governed through political institutions which strike a balance between the dignity of persons and the common good, still needs to be financed. Financing the activities of local government requires sacrifice and it is therefore imperative that contributions to the fostering of the common good are made in a manner which both reflects a person’s responsibility to the community but also respects their dignity. In this chapter I review the various kinds of local government goods and services and associate each with the most appropriate form of revenue. I also spend some time discussing a system of intergovernmental grants founded on the Principle of Subsidiarity as well as explicating on the morality of using debt to finance the provision of local government goods and services. Following this, I devote some time to describing how the political institution of sortition can be employed to enhance the efficacy of fiscal institutions designed to respect the dignity of the current and future generations of local government taxpayers. I conclude with some thoughts regarding how careful design of the revenue structure of local government can dispel fiscal illusion and bring citizens closer to the finance of local government which serves their bona fide interests best.