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Retail sales taxes, critical for American government finance, embody a “narrow base, high rate” Great Depression legacy. Legislation can correct this, but technologies and new economy economic stru...

Theories describing rent seeking in the public sector posit a number of negative fiscal outcomes that the choices of corrupt officials may generate. The evidence presented in this article shows that states with greater intensities of public corruption have higher aggregate levels of state and local debt. If corruption in the 10 most corrupt states were only at an average level, their public debt would be 9 percent lower, or about $249.35 per capita, all else being equal. Notably, institutional control measures may not have succeeded in restraining the expansion of state and local public debt in the presence of greater levels of corruption. State and local governments would achieve more efficient levels of fiscal discipline by curbing public sector corruption.

The U.S. Supreme Court ruling in South Dakota v. Wayfair, Inc. that states may require sellers without a physical presence to collect use taxes has generated much enthusiasm and dread among observers. We present new data on revenues from the state use tax between 2010 and 2017. We also present a unique monthly series of remote vendor use tax collections for Indiana before and after the Wayfair ruling and use the synthetic control method to derive a treatment effect of the policy change. While remote vendor registrations have tripled, we find there have been relatively modest impacts on state revenue.

The regions of the Russian Federation are economically disparate. Differential endowment with energy resources drives much of this disparity and this translates into highly diverse fiscal capacities. Although regions do have some independent revenue-raising authority, all taxes are administered by the national Ministry of Taxation and a sizable share (roughly 45%) of total national revenue is transferred to regional and local government. The transfers, however, are not of equal importance to all regions. This article focuses on vertical and horizontal balance in the country. It examines differential revenue capacity and the extent to which national transfer programmes mitigate fiscal disparity.

As China has experienced rapid economic growth and increased urbanization in recent decades, a crucial policy challenge for its government has been the development of urban transportation. Although conventional wisdom suggests that more infrastructure investment will stimulate economic development, empirical evidence is mixed. With the use of a panel data model (1999–2011 across Chinese provinces), transportation investment was found to have had significant impacts on economic growth, after which variables were controlled for that measured provincial openness, human capital, and government size. Transportation investment in one province not only promoted economic growth in that province but also had external effects on neighboring provinces. External effects were strong for highways, whereas internal effects were strong for urban roads. [In this analysis, highways in China meant controlled-access highways (freeways).] The results of the study can have policy implications for mechanisms used to fund transportation in China.

Revenue estimates or scores identify the expected impact of a change in a tax law or a change in how existing tax laws are administered. The processes used by states to produce these estimates have been given considerably less attention than have those used to create the revenue baseline or forecast, although both are important to creation of fiscally sustainable budgets. A review of state processes shows that estimating responsibility most often is in a legislative agency, that states usually employ microdynamic estimating methods, generally make their work available on the Internet although infrequently showing the methodology used for an estimate, and rarely have formal quality control procedures for the estimates. Macrodynamic estimates are very rare and some states once requiring this approach no longer do so.

The past half-century has brought heightened expectations for what systems of budgeting and finance may be expected to deliver for the public. From systems to provide a first defense against theft and gross misappropriation, they have become systems to help lawmakers direct public resources where they can give the best public return, to help managers efficiently utilize resources under their control, and to communicate plans and results to the public. Government fiscal systems have developed more useful expenditure classification, established new measures for identifying public performance, brought nontraditional spending into control systems, and made finances considerably more transparent. Systems should, in combination with robust democratic institutions, make the public sector perform in the best interests of the citizenry. But in the face of great fiscal system improvements, governments struggle with staying fiscally sustainable, with meeting financial obligations to vulnerable populations, and even with avoiding default, receivership, or bankruptcy. Even as systems improve, government finances decline amid considerable private sector prosperity. Research over the past decade has done little to aid or explain the sweeping expectation and limited success of budget systems to transform essential elements of governance. It is the purpose of this paper to review progress in the development of robust fiscal systems, identify the major obstacles and failures, and link this evidence to the record of recent governmental financial distress, paying particular attention to the struggles of American governments. The broader questions needing to be addressed are the same questions at the forefront of public sector finance 100 years ago; however, the present focus has not been on these broader implications.

The retail sales tax has provided a strong foundation for American state government finance since its beginnings in the Great Depression. However, its position as a productive, reliable, and administrable revenue source is now under challenge from three forces. First, it continues as a tax primarily on purchases of tangible personal property, despite the shift in consumption toward services. Second, the physical presence rule for taxation of sales by remote vendors creates an intolerable imbalance between local and remote sellers. And third, legislatures keep gnawing away at the base with politically attractive but fiscally unjustifiable exemptions. In total, the position of the sales tax as a viable and defensible revenue alternative is at risk.

Seventy years of central planning by authoritarian government distorted the economies of the countries of the former Soviet Union (FSU) almost beyond belief and left them unprepared for a smooth transition to market economies.(1) Factories placed in economically unviable locations produced items unsalable because of poor style, sloppy workmanship, unreliability, or hopelessly high production costs. People were distributed around the countries, often without consideration for where they might want to live and with minimal attention to where their presence might yield economic value. The contribution that management, finance, and organizing services make to the value of businesses and to society was dismissed. It was no wonder that opening these countries to democratic choice, to economic freedoms, and to international markets brought economic collapse. However, markets will develop on their own--even in Soviet times, people survived by informal exchange and, while unaccustomed to many elements of modern marketing, finance, and business management, they did understand trade, as any visit to a FSU country today will quickly confirm. Given a modicum of economic freedom, even with ambiguous property rights and doubtful enforceability of contracts, markets emerged in response to individual demands for goods and services. Government budget processes and procedures--the systems for making public sector resource allocation decisions --do not freely emerge like markets.(2) The fiscal system consistent with Soviet times was not compatible with markets, free choice, personal and economic freedom, and democratic decision making. The old system must stop and a new system--a framework of laws and human and physical resources appropriate to new tasks--must be created by conscious and concerted actions. Early successes with the development of markets in some FSU countries, notably the Russian Federation, mislead many observers into believing that fiscal reforms were working. Continuing evidence, however, including the great Russian crisis of 1998--a collapse emerging from unsustainable budget deficits and default on federation and regional debt issues--shows how wrong that observation would be.(3) Absence of restructuring and reform in the public sector are easily apparent throughout the FSU. Examples include contentious and confused fiscal relationships between tiers of government in the Russian Federation; budget processes unable to constrain fiscal deficits or to manage allocation of scarce resources among governmental programs; inability to pay wages, pensions, and other public obligations as they come due; unreformed tax systems that seem more designed to punish enterprise than to raise revenue; tax collectors and government agencies that work with barter instead of money; and tax administration that thinks in terms of collection by brute force rather than voluntary compliance.(4) The following sections, based on several years of direct field work including extensive discussions with senior government officials in several FSU countries, explore critical problems in the budget systems and procedures of these countries that have complicated or prevented their contribution to the normal expectations of what these systems must do: (1) maintain aggregate fiscal discipline, (2) assure direction of public resources to areas of greatest national need, and (3) encourage efficient use of resources in public agencies (Campos and Pradhan 1996, 1997; Schiavo-Campo and Tommasi 1999). Even though public budgeting is a planning process in both centrally planned and market economies, the budget environment and the expectations for the budget are considerably different in these systems and the transition in process has been difficult. In spite of the years elapsed since the collapse of the Soviet Union and the independence of these states and considerable progress in developing effective and accountable systems in some countries, most of the budget systems have many changes ahead if they are to assure that government services will be within the actual available government revenues and will be appropriate to the needs of the public. …

The remote vendor problem challenges the sales tax as a revenue producer; even more critical, though, is damage to eco- nomic balance, efficiency, and fairness. Congressional relief from the physical presence rule—rendered obsolete by uncertainty about what presence means and by "click and brick" affiliates—requires no undue burden for multi-state enterprises. State adoptions of a burden-reducing common tax structure would be virtually impos- sible because states have substantially different shares of their tax systems at stake in the sales tax and because they start from unique sales tax structures designed for their own economies and politics. Congress could handle the problem by requiring registration for large remote vendors, but only for states affording vendor-friendly compliance (no local use taxes and reasonable collection compensa- tion).

Moving the federal government from its heavy reliance on taxes on income and profits to taxes on general consumption has been proposed as a way to improve equity, economic efficiency, and transparency of the tax system. The value-added tax and the retail sales tax offer economically equivalent approaches to general consumption taxation, differing only in how they are administered. A comparison of the two taxes as they now operate, however, suggests considerable advantage for the value-added tax as a national revenue source. Only in terms of requiring fewer businesses to collect the tax is there an advantage to the retail sales tax. The value-added tax is superior or equivalent to the retail sales tax in other important fiscal criteria.

}The American federal system shows substantial vertical fiscal balance: the level of government that spends closely corresponds to the level that raises revenue to finance that expenditure. This responsibility allows state-local governments great freedom in regard to the size of their public sectors relative to their state economic base, in how they arrange revenue structures to distribute the cost of their public programs through their economies, and in how they allocate their public budgets across service categories. This freedom results in great horizontal diversity in both expenditure and revenue choices. Revenue decisions are somewhat more diverse than expenditure allocations. If a considerably expanded federal tax sharing program were adopted, as some have proposed, vertical balance would decline somewhat and, most likely, so would the regional diversity that characterizes the American system.

This article analyzes the genesis of certificates of participation (COP) in the municipal securities market. We document the trend in the use of COPs and illustrate problems in the market through case studies of the Richmond Unified School District default and the Brevard County referendum crisis. The valuable fiscal administration lessons drawn from the growing pains of a maturing sector of the municipal securities market can help municipal governments and investors avoid the tragic consequences that seem to inevitably accompany the circumvention of legal debt restrictions and public accountability.

This article examines potential sources of revenue needed to finance urban services. In formulations for resolving the US urban crisis, answers are unclear and several policy guidelines are suggested. First, political candidates must assess reasonably the cost of public services and avoid blanket assurances of no new or increased taxes. Second, urban local governments must have access to the fiscal resources of the full urban area for which they have been assigned responsibility for providing public services. Third, urban governments must coordinate and cooperate: Fiscal mercantilism is not productive public policy. Fourth, urban local governments must give greater priority to infrastructure maintenance and development in their financial plans. Fifth, urban local governments must improve property tax structure and administration with appropriate assistance from state governments. Finally, urban local governments must make better use of charge financing and must expand use of broad-based sales and income taxes in cooperation with their states. The authors conclude that urban local governments need to look for resources themselves; prospects for major intergovernment assistance, especially federal, are dim.

The president's new budget arrived to Congress two and one-half weeks late. Its contents had been reduced to a single volume and a brief pamphlet. And it included proposals for improving the federal budgetary process. That budget is profiled herein, including discussions of the conditions under which it was submitted, the economic assumptions made within it, and the proposed expenditures and anticipated revenues.

Americans are familiar with the retail sales tax. Therefore, it is not surprising that Congress would consider such a tax as a way to tax consumption expenditure, should it choose to shin from the ...

Two types of organizational systems provide most of the water service in the United States. The investor-owned firm operates on a profit basis generally subject to state commission regulation. The government-owned firm is generally confronted by local control. The comparative efficiency of private versus government firm provision of water services is essentially an empirical issue. Unit costs and other operating statistics are examined for water firms of each ownership form. The analysis shows that private firms tend to have higher operation costs than do government firms, possibly attributable to wage-salary differentials. The analysis also indicates that capital investment in large government firms may result in diseconomies. The analysis creates serious doubt as to whether efficient provision of water services can be better facilitated by large mergers of either ownership form.

This analysis outlines a mass mailing system heavily driven by the desire of Senators to remain in office, using federal money to assist in achieving that objective. The data used here are obviously fragmentary, but they provide a foundation for more extensive work, assuming that the Senate continues its new policy of disclosure. At least as many questions have been raised by this analysis as have been answered, but the evidence does suggest that this spending is part of the drive for reelection. The findings may provide some of the reason for the general unimportance of campaign expenditure by the incumbent on the election result — the resources of the office, including mass mailing, provide sufficient exposure at public expense to dilute the effect of spending in the campaign. We do not know whether such mailing expenditures have any more influence on incumbent success than does direct campaign but, given more experience and data, it should be possible to find out.

Several factors theoretically affect the cost behavior of water systems. These factors include scale, consumer density, and per capita usage. This analysis examines the several possible influences on the unit costs of water service. The statistical analyses indicate that among the factors of scale, per capita use, and consumer density, only the first two factors are important influences on water system costs. Water consumers appear to benefit from being served by large systems and being located in service areas characterized by relatively high per capita consumption. There is little statistical evidence indicating that more dense areas can be provided water service at lower costs than less dense areas.

As central city-suburban fiscal relationships remain strained, it is appropriate to consider the impact of increasing reliance upon local income and sales taxes within urban areas. Especially important questions in that environment include: Are tax base disparities among local units in a metropolitan area greater or less for income and sales taxes than for property taxes? Are property and non-property tax base disparities within the region additive or off-setting? Are central city-suburban fiscal relationships different under income and sales taxes from those found under property taxes? Are local income and sales taxes more or less equalizing with respect to income than property taxes?

Public administration has historically concentrated on the production and delivery of public services. Few such services, however, can be provided without the transfer of resources from private to public use. Except in the case of seizure of private resources (commandeering, condemnation, military draft, etc.), public agencies must purchase their resources at prevailing market prices. For the agency to conduct this purchasing activity, it must have obtained command over money. The processes of obtaining this money are the revenue-raising activities of the public agency, and these activities are, for any government, equally as important as the spending activities. Every dollar spent must have been rasied from some source. These revenue sources include money creation, borrowing, sale of governmental services, intergovernmental aid, and taxation. The Constitution limits money creation to the federal government and aid obviously does not involve net increases in public resources. Each source has particular conditions under which it is most satisfactory for use, but taxation is the source most governments will use to finance most of their activities.1 For this reason, this article will focus on the administration of tax systems to examine the little-examined "other side" of public administration.