Bargaining for a new fiscal pact in Mexico

The authors consider the malaise with the present set-up of fiscal federalism in Mexico from the points of view of the main players-the federal government, the states, the municipalities, and the citizen voters-in order to identify the areas of potential common interest as well as the direct conflicts. There is a zero-sum game on some issues, like the size of aggregate transfers, but not on others, likeraising tax collection and improving accountability for service delivery. The authors consider bargain packages that combine mutually beneficial changes and thus might obtain broad enough political support. They analyze the bargaining packages in two main tracks-one concerning tax assignments, revenue sharing, and tax administration, and another concerning the conjunction of earmarked transfers and accountability for service provision. An important result is that almost all states would find it fiscally attractive to impose a sales tax that replaced part of the federal value-added tax (VAT), even if the federal government reduced revenue sharing enough to cover half the cost of reducing the VAT rate to make room for the state tax.National Governance,Urban Governance and Management,Public Sector Economics&Finance,Banks&Banking Reform,Regional Governance,National Governance,Public Sector Economics&Finance,Banks&Banking Reform,Municipal Financial Management,Regional Governance

Stabilizing intergovernmental transfers in Latin America : a complement to national/subnational fiscal rules?

The traditional theory of fiscal federalism assigns the role of macroeconomic stabilization to the federal government. In addition to this long-standing theoretical result, there is empirical observation that federal governments in developing countries typically have cheaper and more stable access to capital markets, relative to subnational governments. Drawing on the recent experience of four large federal countries in Latin America-Argentina, Brazil, Colombia, and Mexico--the authors examine how intergovernmental transfers affect the division of the burden of stabilization across the levels of government, when the nation as a whole faces economic fluctuations. Imposing stabilizing rules on federal transfers that protect subnational governments from fluctuations in the business cycle can serve two purposes. During boom periods, stabilizing rules prevent subnational governments'tendency to increase inflexible expenditures. And during downturns, stabilizing rules place the burden of borrowing at the federal level-the level most appropriate for macroeconomic stabilization and often the level with superior access to credit. Despite the logic of these rules, recent experience of the four countries reveals that these rules can be risky, particularly inthe face of high GDP volatility. Protection against falling revenues in the downturn constitutes a contingent liability for the central government. Argentina's stabilizing rule contributed to fiscal and political tensions during its ongoing crisis. Colombia is beginning to implement similar rules. Meanwhile, Brazilian and Mexican transfers do not implement such rules and fiscal and economic results do not appear to have fared any worse for this absence. The authors draw on the country experience to establish that certain conditions should be in place before establishing a stabilization rule to federal-to-subnational fiscal transfers-in particular the elimination of long-term structural fiscal imbalances, either within levels of government or across levels of government.Municipal Financial Management,Public Sector Economics&Finance,Public&Municipal Finance,Banks&Banking Reform,Urban Economics,Banks&Banking Reform,National Governance,Public Sector Economics&Finance,Municipal Financial Management,Urban Economics

Taxation - Federal Estate Tax - Effect of Presidential Freezing Orders on the Creation of Excludable Bank Deposits for Nonresident Aliens

Decedent, a citizen and resident of France, was the sole income beneficiary of a trust fund held in New York by the plaintiff as trustee. An executive order, issued pursuant to the Trading with the Enemy Act, prohibited remittance of trust income to the decedent from 1940 to the time of her death in 1946. As this income accrued, the plaintiff\u27s trust department transferred it to the plaintiff\u27s general banking department in its own name as trustee and subject to its order out of current banking funds. In an action by the executor of the decedent-beneficiary\u27s estate to recover an amount paid as an estate tax deficiency on the money so deposited, held, recovery granted. The impounded income, being moneys deposited ... by or for a nonresident not a citizen within the meaning of section 863 (b) of the 1939 Internal Revenue Code, was not property within the United States for federal estate tax purposes. City Bank Farmers Trust Company v. United States, (S.D. N.Y. 1959) 174 F. Supp. 583

Labor Law - Collective Bargaining - Union\u27s Unprotected Harassing Activites as a Refusal to Bargain in Good Faith

While bargaining for a new contract, the union announced that it would engage in a work-without-contract program designed to harass the insurance company employer into accepting its demands, in the event that no agreement was reached prior to the expiration of the existing contract. When that contingency occurred, the program was instituted consisting of such activities as refusing to write new business for a period, refusing to do customary duties, engaging in sit-in mornings, soliciting policyholder support against the company, and mass demonstrations at the company\u27s home office. The union continued to attend bargaining sessions, but it informed its members in a directive that ... a satisfactory contract will be won in the field and not at the bargaining table. The company thereupon charged the union with a refusal to bargain in good faith in violation of section 8 (b) (3) of the Taft-Hartley amendment. The National Labor Relations Board rejected the Trial Examiner\u27s recommendation to dismiss and entered a cease and desist order against the union. The Court of Appeals for the District of Columbia unanimously refused to enforce the order. On certiorari to the Supreme Court, held, affirmed, three justices dissenting. Where a union\u27s conduct at the bargaining table is in apparent good faith, its concurrent use of extrinsic economic weapons to force acceptance of its demands is not inconsistent with good faith bargaining. NLRB v. Insurance Agents\u27 lnternational Union, AFL-CIO, (U.S. 1960) 80 S.Ct. 419