Intergovernmental fiscal relations in China

The choice of the"right"fiscal relationship between central, provincial, and local governments depends on how a government weighs the benefits of decentralized economic development policies against the costs of having less effective central fiscal management. Three strong forces justify more fiscal centralization in China's highly decentralized fiscal system. First, Bouts of inflation and recurrent fiscal deficits can be seen as calling for more central control over the budget. Second, Reform of an economic system relies heavily on the use of tax policy as an allocative instrument to influence economic decisions. Local control of the implementation of the tax system can and probably has compromised some objectives of the central government's tax policy. Gaining tighter control over the revenue system will probably require reducing if not eliminating local government discretion in providing special tax concessions. Third, if the center wants to move ahead with price reform and to encourage enterprise reform, it needs a more centrally controlled revenue sharing or assignment system that reduces the dislocating effects of such reforms. Bahl and Wallich conclude that a reformed system of intergovernmental finance must meet the center's needs for stabilization and the provinces'needs for revenue and equalized spending capacity, supplemented by an improved system of financing local capital expenditures through borrowing, a system of benefit charges and improved planning.Public Sector Economics&Finance,National Governance,Banks&Banking Reform,Municipal Financial Management,Urban Economics

Property Taxation in the 1980s

Students of the property tax have been telling us of its demise for decades. In one very important sense they have been correct: the property tax has steadily diminished as a percent of personal income and total state and local government taxes. By 1977, property taxes accounted for only about one-third of total state-local government taxes (see Table 1). It may seem a paradox, given this decline, that so many of the most important fiscal issues of the 1970s revolved around property taxes. Proposition 13 and school finance reform come quickly to mind, and the fiscal problems of New York City and Cleveland were in no small measure due to the inadequacies of property tax financing. This policy concern with the property tax is, of course, not a paradox at all. It still is the most important local government revenue source and has increased substantially in real per capita terms. What of the property tax in the 1980s? Yet in projecting the performance of the property tax, one should look less at the tax itself than at the environment in which it is levied. Perhaps more than any other State and Local government tax, the property tax grows because of discretionary rate and base changes hence its future importance will be largely shaped by the political and economic environment in which it operates. The very modest goal of this paper is to suggest the nature of some of the political and economic pressures which will effect the future financing role of the property tax. The view here is that a further decline in the relative importance of the property tax as a State and Local government financing source is inevitable. Over the longrun, the slow and unstable growth in the national economy, slower growth in the state-local sector, a trend toward financial centralization and continued shifts in the regional distribution of population and economic activity in the United States will limit the growth in property taxation

Taxation and the Economy: A Plan for Reform

This Commission was established out of concern for the relationship between the Ohio economy and its tax structure. The economy has gone through a long period of slow growth relative to the rest of the nation, and though the early 1990s have seen some improvement, all signs are that this long term pattern will continue into the next century. The state\u27s economic and population structure is changing. The Ohio of today is less of a manufacturing center and more of a producer of services, earns more income from transfer payments and less from wages, consumes more services than goods, and is home to increasing numbers of the elderly and a growing concentration of the poor. Two major questions were central to the work of this Commission. The first is whether the present tax structure is consistent with the objective of attracting more investment and jobs to the state, and moving Ohio to a higher economic growth path. The second is whether the present tax system fits Ohio\u27s new economic structure and spreads the tax burden fairly over all sectors of the economy. The evidence suggests that the present tax system is deficient on both counts. The Commission recommended a comprehensive reform (Commission 1994)