Thursday, September 6, 2007
Kirk Stark (UCLA) presents Rich States, Poor States: American Federalism and the Politics of Fiscal Equalization at Boston College today as part of its Tax Workshop Series. Leandra Lederman (Indiana) blogged Kirk's presentation of an earlier draft of the paper at the Spring 2007 Critical Tax Theory Conference at UCLA:
The project analyzes the use of fiscal equalization grants to reduce disparities in resources between rich states (or provinces) and poor states. These grants are "no strings attached" grants from a country's central government to states with lower-than-average taxing capacity (regardless of the amount of tax each state actually collects). Kirk listed numerous countries that use such grants, including Canada, where they are a constitutional requirement.
A focus of Kirk’s project is the political issues that fiscal equalization would raise in the U.S. If fiscal equalization were adopted here, most of the recipient states would be in the south. For example, based on fiscal capacity data from a 2006 Tax Policy Center study, Kirk determined that the top seven recipient states by size of per capita payment would be Mississippi, West Virginia, Arkansas, Alabama, Oklahoma, Louisiana, and South Carolina. In addition, most of the states that would receive equalization grants are "red states," and red states would get the bulk of the grant monies. The question of whether Canadian-style fiscal equalization should be adopted in the U.S. thus raises interesting political questions. As Kirk asked, are we currently in an era in which fiscal equalization would be possible? Desirable?