Fiscal Equity Research Articles

The political economy of fiscal transfers: The case of Ethiopia

AbstractThis article examines the political economy of fiscal transfers in Ethiopia. Utilising an original data set spanning 1995–2020, as well as interviews and document analyses, the article illustrates how different factors interact to shape the distribution of grants. Statistical analysis indicates that population size is critical in determining regional grant shares. However, the analyses reveal a pattern of ethno‐regional favouritism in grant distributions during the early stages of Ethiopian federalism. During that period, opaque and centralised decision‐making processes, coupled with the dominant influence of the Tigray People's Liberation Front in the federal government, resulted in grant distribution deviating from principles of fiscal equity. Over time, this evolved into more fluid forms of negotiation influenced by intra‐party competition, dynamics of bargaining between the central and regional authorities, and regional assertiveness, collectively shaping the allocation of grants alongside the grant formula. The analysis highlights how economically and politically marginalised regions are disadvantaged, especially when their population is small. The absence of an independent grant agency means that political considerations continue to affect seemingly formula‐driven allocations. The Ethiopian case underscores how intra‐party bargaining and alignment along ethnic and regional lines undermine the effectiveness of formula‐based grant allocations in the absence of an independent and empowered grant agency.

Re-centering civil rights in the reauthorization of ESEA: An equitable, ecological, evidence-based framework

This article considers the reauthorization of the Elementary and Secondary Education Act (ESEA) in light of current educational inequities and the impact of the pandemic. The reauthorization presents an opportunity to center equity and justice and revitalize the civil rights aspects of the law. The authors review recent studies about the myriad ways the COVID-19 pandemic affected students, teachers and school systems and situates the reauthorization within the broader political context, including federal aid to states and districts during the pandemic. The authors present overarching policy recommendations: (1) a restructuring of the law’s titles to focus on students, teachers, and systems (i.e. schools and districts); (2) a focus on the principles of racial equity, an ecosystem approach to serve students’ needs across policy silos (i.e., housing and health), and a focus on research evidence; (3) policy targets for students; (4) policy targets for educators, including professional renewal and retention; (5) policy targets for the education system as a whole, including a focus on fiscal equity and facilitating regional approaches to cross-sector collaborations. The article presents a coherent conceptual framework for a redesign of ESEA with an emphasis on equity, evidence use, and ecosystems that is argued would directly address the needs of students, teachers, and systems.

Intergovernmental transfers and fiscal equalization across the north‐eastern states of India: Evidence from panel data

While numerous studies have tried to analyze the impact of intergovernmental transfers in fostering fiscal equalization in India, there need to be more studies in the context of north‐eastern (NE) states. Situating in a geographically isolated and economically backward region, the states of NE India depend heavily on central fiscal transfers to meet expenditures and to promote various economic activities in the region. One of the essential objectives of these transfers is to achieve fiscal equity. Hence, the study attempts to analyze the fiscal equalizing nature of the intergovernmental transfers across NE India during 1991–2019. The coefficient of variation (CV) analysis results indicates that although fiscal transfers reduced the magnitude of disparity in the own‐source revenue across the NE states, a significant amount of disparity still exists in the resource base across these states. The regression analysis findings suggest that the transfers across these states need to be more fiscal equalizing. The per capita gross state domestic product emerges as a positive and significant in predicting per capita transfers, and hence it questions the progressivity of central transfers. When assigning the interstate share of transfers, more weight should be placed on fiscal equalizing factors such as per capita income. The Finance Commission of India should emphasize fiscal equalizing criteria when allocating weights and recommending transfers to the NE States. Additionally, states with low incomes should be recognized in plan schemes.

Indirect methods of estimating tax liabilities theoretical and practical aspects

This article represents a complex research on the indirect methods of estimating the incomes of natural and legal persons, residents and non-residents, control that is carried out based on information from indirect sources and aims to identify taxpayers who obtained income and did not declare it. The importance of these methods is indisputable, as they are applied in most states with efficient tax systems, based on the given methods it is possible to calculate tax obligations that have been hidden by the dishonest taxpayers. The applicability of the given methods in the Republic of Moldova has increased in the last 5 years, by means of the given methods, fiscal equity has been restored, tax evasion has been limited and the state’s tax revenues have increased. In the results of the application of indirect methods, undeclared income is usually identified, taxes on this income, late fees and fines are levied.

Equidade fiscal e controle das renúncias de receitas

The work aims to demonstrate the need to improve instruments for controlling fiscally responsible management of revenue waivers, based on the observation that the search for public debt sustainability is not limited to the inspection of primary expenditures. To carry out this task, the text is divided into three chapters, including an introduction to the problem. The second chapter deals with the need for fiscal equity in controlling the balance of public accounts, which presupposes, among other dimensions, effective collection of all available revenues (art. 11 of the LRF). In conclusion, hypotheses are proposed for improving the control of tax waivers, given the normative framework that governs them.

The Long and Winding Road to Local Fiscal Equity in the United States: A Fifty-Year Retrospective

Abstract Unlike many other countries, the United States does not have a comprehensive federal transfer scheme for explicit fiscal equalization but rather employs an array of categorical and block grants, some of which are formula-based while others are project-driven. However, the allocation of many of these grants has equalization effects resulting in the narrowing of fiscal disparities among jurisdictions. Few studies have attempted to quantify the extent of equalization achieved with federal and state grants in a manner that would allow comparisons across states and over time. In this study, we set out to measure the extent of equalization across local governments in the United States that is implicit in the federal grants system and more explicit in the grants implemented by the individual states. Rather than focusing on specific types of local services, we look at the evolution of per capita resources available to all types of local governments combined.

State Takeover of School Systems and Within-District Fiscal Equity

State takeovers of school districts typically involve dramatic changes to the workforce in the targeted school system and are often undertaken for the express purpose of improving a school system’s finances. However, little is known about how takeover affects education spending, particularly the distribution of funds across schools within districts. This has important implications for human resources because inequitable spending exacerbates teacher quality shortages for schools that serve marginalized students. We capitalize on a novel source of school-level education spending data for 2018–2019 to examine how takeover influences overall spending, equality of spending across schools within districts, and race-, ethnicity-, and class-based gaps in spending across schools. We do this for a national sample of 24 districts taken over between 2013 and 2019 matched to a set of untreated comparison districts with a high propensity for takeover. We find that state takeover is associated with higher levels of education spending, and that the greater funding promotes racial and ethnic fiscal equity but does not increase income-based school finance equity. Importantly, average increases in school spending are likely too small to substantially affect educational inequality. Therefore, takeover does not seem to be a sufficient mechanism for meaningfully mitigating within-district finance inequity.

An exploratory analysis of the dynamics of the activity of the Fiscal Anti-fraud Directorate General in the 2014-2020 period at the level of Romania

The Fiscal Anti-fraud Directorate General (DGAF) is a structure of the Romanian public authority whose primary objective is the fight against tax evasion and tax and customs fraud. The activity of investigating fraud and dismantling the transactional chains that lead to prejudicing the state budget is important both from a financial point of view and from a social point of view and it contributes to building trust in the safety and integrity of the tax system. Given the need for a sustainable legal framework for fighting against evasion and taking into account the importance of a unitary control mechanism able to eliminate parallelisms or divergences in the assessment of economic operations, the research focuses on the analysis of the dynamics of the activity of the Fiscal Anti-fraud Directorate General by means of the indicators reported by the institution. The paper allows the identification of certain correlations or interdependencies between the specific indicators of the fraud investigation activity, as well as the foreshadowing of some areas for normative improvement related to the reporting of the results of the anti-fraud activity. The reduction of tax evasion and the increase in collected budget revenues are objectives that convey a strategic importance to DGAF’s activity, so that the research of the indicators reported by this structure of public authority produces an image of the degree of economic compliance and the compliance with the premises of fiscal fairness and equity.

Australian Federalism in James Buchanan's Early Work on Fiscal Equity

James Buchanan, one of the founders of public choice theory and constitutional economics, began his career studying fiscal federalism in the doctoral program at the University of Chicago. This paper explores Buchanan’s early interest in Australian experiences with federation and intergovernmental grants as a guide to fiscal federalism in the United States. In his dissertation, Buchanan cited Australia in his arguments against the consolidation of the American states into larger regional governments. He also drew lessons from the early years of the Commonwealth Grant Commission for the intergovernmental grants that he proposed for the United States.

Australian Federalism in James Buchanan’s Early Work on Fiscal Equity

James Buchanan, one of the founders of public choice theory and constitutional economics, began his career studying fiscal federalism in the doctoral program at the University of Chicago. This paper explores Buchanan’s early interest in Australian experiences with federation and intergovernmental grants as a guide to fiscal federalism in the United States. In his dissertation, Buchanan cited Australia in his arguments against the consolidation of the American states into larger regional governments. He also drew lessons from the early years of the Commonwealth Grants Commission for the intergovernmental grants that he proposed for the United States.

Pensamiento económico en las políticas de gestión tributaria desde el enfoque de la evasion fiscal en el Ecuador

A democratic and social rule of law, taxation is an instrument of society to achieve its own objectives, which must focus on economic and social development, to promote the productive, educational, and scientific sector; then tax management is the effective control mechanism based on the principles, the research aims to determine the relationship between economic thinking and taxpayers' perception of tax policy and tax evasion. The methodology used is a mixed approach, supported by the descriptive documentary study, based on the bibliographic and digital review, it should be noted how tax policies have had relevant results in reference to collection, which is consistent with economic thinking, because evidence in the years since 2000 the thought was neoliberal the collection is low, while from 2007 to 2016 with the revolutionary socialist thought there is an increase in the collection. On the other hand, new tax reforms are suggested by creating a tax equity law; which allows changes to improve tax revenue regardless of the political ideological thinking of the government in office; what is important is social equality with fiscal equity. Therefore, there must be a relationship between taxpayers with tax policies and tax evasion. This relationship must generate trust so that the country can develop and satisfy social inclusion policies and improve the quality of life through a new society with ethics and morals.

James M. Buchanan and “The Human Resource”

This paper describes James M. Buchanan’s analysis of human capital concepts in a class paper that he wrote in 1946 titled “Federalism: One Barrier to Labor Mobility.” The paper described how federal financing of human capital investments impeded labor mobility and formed the basis for his 1948 dissertation Fiscal Equity in a Federal State. Buchanan saw the various types of human capital as “complex and interrelated,” and therefore not easily amenable to partial equilibrium analysis. Similar to his professor, Theodore Schultz, Buchanan believed there was ample scope for public investment in human capital and did not see conceptualizing education and health as “capital” as a reason for relying exclusively on privatized provision. In “Federalism: One Barrier to Labor Mobility,” Buchanan also argues that differential birth rates in low- and high-income regions had dysgenic consequences by operating against the relative population increase of “a socio-economic elite” that had “eugenic advantage” compared to “the bulk of the population” (Buchanan, 1946, 9). These eugenicist arguments raise important questions about the relationship between early human capital theory and eugenics, and cast a new light on Buchanan’s early scholarship and career.

James M. Buchanan, Political Regionalism, and the Southern Agrarians

James M. Buchanan described, discussed, and rejected the regionalist proposals of Howard Odum and William Yandell Elliott in his 1948 dissertation, Fiscal Equity in a Federal State. His discussion of regionalism is of particular interest because Odum and Elliott's ideas were hotly debated by the Southern Agrarians in the 1930s and 1940s. Odum was a frequent critic of the Agrarians, while Elliott was a former colleague of the poets at Vanderbilt University. Some Agrarians, such as Frank Owsley, enthusiastically embraced Odum and Elliott's ideas. Others, such as Donald Davidson, opposed their proposals. In this note I show that Buchanan's rejection of Odum and Elliott bears a close resemblance to Davidson's own criticism. This case illustrates the complexities of Buchanan's relationship with the Agrarians, a problem first highlighted by Nancy MacLean in her intellectual biography of Buchanan, Democracy in Chains.

A centralized directional distance model for efficient and horizontally equitable grants allocation to local governments

This paper proposes a directional distance model for efficient resource allocation when there is a centralized decision maker who oversees all units. The model is designed to allocate grants from an upper-tier government to the municipalities under its jurisdiction. Local governments employ the grants together with levied local taxes to provide services to their citizens. The objective of our formulation is to optimize grants allocation across municipalities taking into account efficiency, effectiveness and horizontal fiscal equity criteria. The model easily allows the setting of alternative priorities of the central decision maker, thus permitting quantification of the trade-off between the potential increase in the provision of local services and its associated cost. The model is applied to the allocation of current grants in the autonomous community of Navarre in northern Spain.

The origins of Buchanan's views on federalism, Chicago 1946–1947

AbstractBuchanan's first writings about federalism and fiscal justice were “'Federalism’: One Barrier to Labor Mobility” and “A Theory of Financial Balance in a Federal State,” two term papers that he wrote before his dissertation and that have never been discussed before. Studying them allows us to complete the recent literature on the origins of Buchanan's fiscal federalism. We show that most of Buchanan's ideas about fiscal equity were already in these works, and also that Buchanan made other claims and used other arguments – about mobility, for instance – that were absent from the dissertation but remained important to him for a long time. We also analyze these essays in the context in which Buchanan was at that time, namely the economics department of the University of Chicago. We show how Buchanan fed on, not to say was influenced by, the courses for which he wrote these essays. This allows us to shed new light on the role Theodore Schultz, D. Gale Johnson, Henry Simons, and Roy Blough, played at the beginning of Buchanan's career.

LA TRIBUTACIÓN NACIONAL EN LAS TRANSFERENCIAS Y REGALÍAS TERRITORIALES DE COLOMBIA: UNA BÚSQUEDA DE EQUIDAD FISCAL ENTRE LA NACIÓN Y LAS ENTIDADES TERRITORIALES (2000-2017)

LA TRIBUTACIÓN NACIONAL EN LAS TRANSFERENCIAS Y REGALÍAS TERRITORIALES DE COLOMBIA: UNA BÚSQUEDA DE EQUIDAD FISCAL ENTRE LA NACIÓN Y LAS ENTIDADES TERRITORIALES (2000-2017)

The Efficiency‐Equity Tradeoff in School Aid: How Efficiency Targeting in Lump‐Sum Aid Generates Unexpected Effects

Formulas of state aid to local school districts have recently incorporated efficiency targeting, which incentivizes school districts to enhance the efficiency of school administration and teaching. This paper shows that efficiency targeting in lump‐sum foundation aid fails to make school districts more efficient than typical foundation aid does. Efficiency targeting instead improves fiscal equity across school districts under almost all scenarios. This paper also clarifies why these unexpected equity effects take place and suggests feasible and implementable alternatives to obtain the efficiency improvement from efficiency targeting.

An Analysis on Fiscal Equity Effects of the Shared Property Taxation in Seoul Metropolitan City

An Analysis on Fiscal Equity Effects of the Shared Property Taxation in Seoul Metropolitan City

Fiscal Equity and America’s Community Colleges

ABSTRACTCommunity colleges play an increasingly important role in the higher education landscape. Yet, what is unclear is whether existing models for funding community colleges are up to the task of preserving, or even expanding, access to postsecondary education, particularly among groups historically underrepresented in higher education. Of particular concern has been whether existing resources are distributed among colleges in a fair and efficient manner. In this article, we use frameworks and policy templates from K-12 education finance to better understand differences in resources available to community colleges nationwide, prior to and after the 2008 recession. Specifically, we evaluate the extent of variation in per pupil spending within states; the extent to which variation is associated with community wealth, a proxy for student need; and whether state appropriations, as a share of total revenue, substantively impact fiscal equity. Taken together, we find substantial differences in spending among community colleges within states; evidence that spending differences may be related to proxies for student need; and that changes in state appropriations impact fiscal equity across community colleges.

European social models in times of crisis: Sapir’s contribution reviewed

PurposeThe purpose of this paper is to show evidence of the divergence of welfare outcomes in the European Union (EU) during the economic crisis, which made the European social model fail, and the convergence among European countries halt. This study reviews Sapir’s model for classifying European welfare state systems and adapts it to the new reality, taking into account Europe 2020 targets on poverty reduction and employment growth.Design/methodology/approachTwo variables are used in the application of Sapir’s graphical analysis to European social models: the employment rate as efficiency indicator, and the people At Risk Of Poverty and/or Exclusion rate as equity indicator. Both efficiency and equity are present in Europe 2020 targets. In addition, a cluster analysis is applied.FindingsThe division of EU member states into four geopolitical social models has proved to be dynamic, changing in the period under analysis. As a consequence of the economic crisis and the fiscal consolidation, efficiency and equity levels across the EU are polarised between the Mediterranean and the Nordic models.Originality/valueThis paper shows the effects of the economic crisis in the EU, analysing the evolution between 2008 and 2014, and incorporating Eastern Europe new member states into the analysis.