Lending a Helping Hand: Two Governments Can Work Together

Abstract

States have independent taxing powers that create con- fl icts between tax autonomy and economic effi ciency. Policymakers can minimize that tradeoff by developing effective working relation- ships between the federal and state governments and frameworks to guide tax policy decisions. However, little research has been done on the appropriate level of interaction between the different levels of government. We describe three broad areas of federal/state interactions and cooperation and evaluate the existing and planned cooperative efforts based on a set of policy goals.