The Impact of State Fiscal Policies on Local Government Inequality.

Those who advocate state regulation of local politics often argue that state governments can and should reduce inequalities across local communities. We study a class of state policies that are designed to limit local control over fiscal policy. Based on an empirical analysis of fiscal behavior in a sample of Michigan cities, we find evidence that these state tax limitations exacerbate, rather than reduce, disparities across local communities on a number of dimensions. Communities with less property wealth are more likely to be constrained by the state TEL, and being constrained is found to be associated with less flexible fiscal policy, reduced citizen satisfaction with public services, and lower perceived quality of life. ..PAT.-Unpublished Manuscript [ABSTRACT FROM AUTHOR]