Fiscal Plumbing Quiz #2

What is Timmons’ basic proposition about the class nature of fiscal contracts?

• the class makeup of the taxed group shapes the services they receive in return

• when the state taxes the poor mainly through regressive taxes, it has incentivies to provide the poor with basic public services (welfare)

• when the state taxes the wealthy mainly through progressive taxes, it has incentives to provide the wealthy with secure property rights

• in other words, “those who pay are those who benefit”

How might Timmons’ basic proposition about the class nature of fiscal contracts be at odds with what Kaldor is arguing?

How is Schneider’s use of the term “social contract” different from Timmons’ use of the term “fiscal contract”?

• believes it is useful to think of taxation as a (fiscal) social contract that is metaphorical since the “contract” is not physically written down

• believes social contracts are relatively visible and concrete when forged around fiscal issues

• the creation of effective states (in Western Europe) can be traced to implicit fiscal contracts; rulers secure predictable, bargained tax revenues from organized tax-paying groups in return for formal political representation and substantial influence over public, and especially, fiscal policy

• believes that in Latin America, conquest, inequality, militarized and exclusive governance, and political violence have led to a weak social contract in the region

• Timmons believes the fiscal contract is more about a political bargain, emphasizing the class nature of said bargain; also notes that taxation generates leverage for citizens who can force governments into accountability

Washington Consensus Reforms

• initiated in the 1980s and continued through the 1990ssought to make tha tax structure more neutral and less distortionary, simplify revenue operations, increase levels of collection (to deal with hyperinflation), and promote horizontal equity in tax systems

• reduced or eliminated preferential treatment for particular sources of corporate income and particular economic sectors

• modernized and strengthened tax institutions 

• though assessments of success vary, the reforms did increase the scope for open public debates around taxation

Why is it difficult to assess the extent to which Washington Consensus reforms have been successful?

• inconsistent implementation: measures to improve tax administration have received the greatest attention, while those aimed at streamlining tax regimes, eliminating exemptions, or broadening the tax base were implemented less consistently, reversed, or watered down

• assessment criteria: economies grew but the wage gap widened

What do Buchanan and Musgrave agree upon, and what do they disagree about?

Why did Buchanan make more of Tiebout’s work than Musgrave did, even though Tiebout was Buchanan’s student?

The Fiscal Federalists draw a direct line between a state’s own revenue-raising capacity and the efficiency and effectiveness of locally provided public goods. Why do they make this linkage? How might it be related to the problem that “revealed preferences” pose for the budgeting process?

The Fiscal Federalists present normative arguments for determining what subnational governments should do, and how they should pay for it (expenditure and revenue “assignments”). Around what functions (e.g., education, health, social welfare) do these assignments necessarily get fuzzy? Beyond this fuzziness, why might these normative principles be difficult to implement in practice?

Why is it always technically difficult and politically contentious to estimate so-called vertical and horizontal revenue gaps?

Given the technical difficulty and political contentiousness in estimating vertical and horizontal revenue gaps, why are some of these calculations always being made somewhere in intergovernmental fiscal systems. 

Are attitudes towards vertical and horizontal gaps related to ideas about “Layer Cake Federalism,” “Cooperative Federalism,” and “Competitive Federalism?”

Myles and Quadrango lay out a variety of arguments about the relationship between industrialization, democracy, mass mobilization, and the Welfare State. How does Steinmo build on them, and where does he focus particular attention to explain variations across a common trend line?

What do the “deterrence theory of taxation,” and Mancur Olson’s “logic of collective action” have to do with classical liberalism and the basic assumption about human nature that underpins most if not all modern economics?

How does Kahan’s logic of reciprocity differ from the “deterrence theory of taxation,” Mancur Olson’s “logic of collective action,” classical liberalism, and the basic assumption about human nature that underpins most if not all modern economics?

What is Rothstein & Ulsaner’s critique of the literature on social trust, and how is this related to their argument about the importance of universal as opposed to targeted social programs?

Why do Rothstein and Ulsaner say that universal programs funded by ‘regressive’ (value added) taxes are an efficient way to promote economic equality?

In what way is Riker’s account of the origins of federalism like Schumpeter’s account of the Tax State?

What does Riker mean by a “federal bargain,” and how does the “Virginia Plan” fit into his argument about the writing of the U.S Constitution?

Why does Riker argue that the idea that federalism is principally about guaranteeing freedom is an “ideological fallacy”? Who does he say generally profits most from federal arrangements?

According to Lepore, what is the “thing that could not be named” in the Constitution? What relationship might it have to Riker’s idea of a federal bargain? Why might is be considered tragic, and how do Franklin and Washington figure in the tragedy?

According to Anderson, what is the relationship between in-group favoritism, opportunity hoarding, durable inequalities, and racism?

What does Anderson mean by “non-ideal” social theory?

What does Maxwell say was the major fiscal problem of the federal government was between the 19th century? What does he say happened in the 1930s?

Why does De Tocqueville begin his analysis of America with an examination of the New England township and what does he say about the virtues and fragilities of municipalities in general, and about the difference between European and American towns?

How does De Tocqueville characterize the difference between how slavery has affected African Americans and how colonization has affected Native Americans?

Why does De Tocqueville say that “it is impossible to destroy men with more respect for the laws of humanity” when speaking about Native Americans?

What does he say about how slavery has corrupted whites, and what does he mean when he says “slavery, then, does not attack the American Union directly in its interests, but indirectly in its manners?”

What were the main instruments of what Gibson calls “Southern boundary control” in post-Reconstruction America?

stabilization, distribution, and allocation functions of government

the decentralization theorem

public choice theorists

fiscal federalist theorists

How do fiscal federalist and public choice theorists differ?

federal state vs unitary state

competitive federalism

cooperative federalism

layer cake federalism

revenue and expenditure assignment

vertical and horizontal gaps

• Washington Consensus sought to promote the “horizontal” dimension of equity in tax systems

“own” revenue

shared taxes

general revenue grants

• aka general revenue transfers

earmarked grants

• aka specific transfers

block grants

fiscal equalization grants

tiebout equilibrium

“The Historic Compromise”

Esping-Anderson’s “Three Worlds of Welfare Capitalism”

• Anglo-Saxon/Liberal

• Corporatist/Conservative

• Nordic/Social Democratic

unitary vs targeted social programs

five taxes of the modern welfare state

PT, CIT, VAT, payroll (social security), and property tax

personal income tax (PIT)

corporate income tax (CIT)

value-added tax

payroll tax

• aka social security

property tax

Logic of Collective Action

Deterrence Theory of Taxation

logic of reciprocity

conditional cooperation

unitary vs federal states

Virginia Plan

3/5ths Compromise

Article 1, Section 8 of the Constitution

Treaty of Paris, 1783

10th Amendment to the Constitution

Centralized vs peripheralized federalism

“state’s rights”

opportunity blocking and hoarding

in-group favoritism

non-ideal social theory

What is ethnocentrism and how does it relate to in-group favoritism?

concurrent tax powers

“spirit of the New England Township”

“maladjustment in the distribution of government functions and revenues”

Distribution Act of 1836 and its relation to the “surplus revenue problem”

nullification

Cumberland Road

Morrill Bill

grants in aid and their relation to conditional grants

“solid south”

dual citizenship

United States vs Cruikshank

malapportionment