Future Challenges in Fiscal Federalism

Session Submission Type: Complete Session

Abstract

Federalism Challenges explores the evolving dynamics of decentralized governance in an era shaped by technological transformation and growing demands for local autonomy. A key theme is the restructuring of fiscal federalism to enable fair, accountable, incorruptible, and responsive governance. The discourse identifies a global trend toward empowering local governments, proposing innovative governance models like decentralized unitary systems and federations of civic republics. These models prioritize local autonomy, performance-based intergovernmental transfers, and fiscal sustainability.
Technological advances are also redefining revenue assignment, especially for subnational governments. As digitalization disrupts traditional tax bases, governments must adapt outdated tax structures and make swift policy reforms to remain effective—especially in high-growth urban and developed areas. Amid these pressures, the property tax emerges as a promising yet complex fiscal tool, with diverse valuation methods and base definitions, and the potential to act as a wealth tax and value capture mechanism.
Subnational borrowing plays a growing role in funding local infrastructure and enabling macroeconomic stability. However, success depends on sound institutions, fiscal rules, and governance practices. The study emphasizes that poorly managed borrowing can exacerbate fiscal risks, especially in developing nations.
In the U.S., legacy systems in state tax administration lag behind the demands of a modern digital economy. Structural gaps in data, policy, and resources threaten tax enforcement and revenue capacity. The call for reform includes digital investment, cross-sector collaboration, and long-term planning to enhance resilience and public service delivery.
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Subject Area

• Fiscal Federalism/Local Tax Competition

Chair

• Sally Wallace, EY

Discussant

• Roy W. Bahl

Individual Presentations

• Implications of Technological Advances for Revenue Assignment - Bill Fox, University of Tennessee; George Zodrow, Rice Univ. Econ. Dept.; Bill Fox, University of Tennessee

• From Revenue Assignment to Revenue Structure: Alternative Approaches to Property Taxation in a New Era of Tax Competition - Joan Youngman, Lincoln Institute of Land Policy; Enid Slack, University of Toronto

• The State of Tax Administration in the US:Legacy Systems Meet the Economics of the 2020s - Billy Hamilton

• Managing Decentralization - Paul Smoke, New York University

Session Organizer

• Paul Smoke, New York University