American local government financing shifted fromtaxation toward user fees and charges (UFCs) in the late1970s, with substantial efficiency and equity implications. Normatively, the shift aligns with the benefit principle; positively, the shift is often attributed to tax revolts. We test the two associations via a difference-In-differences design and a fiscal stringency measure of tax and expenditure limitations (TELs); we also test the moderating effects of overrides on TELs. Our results confirm that state-Imposed TELs caused the shift in local public finance; the results are robust to change of sample and empirical strategy. This article helps explain the relationship between tax revolts and non-tax revenue and provides evidence that fiscal constraints imposed by a higher level government on a constituent level can have significant effects, Including effects beyond the intent of the constraints' framers.
ASJC Scopus subject areas
- Sociology and Political Science
- Public Administration