Abstract
In their ground-breaking work The Power to Tax, Buchanan and Brennan find decentralization to be the key to protect citizens from excessive taxation. Citizens could compare, choose, and migrate, and thus force their government in tax competition to administer their money with due care. In our contribution to this book, we argue that a solid financial architecture requires institutional congruence. The power and responsibility for taxation, expenditures, and debt must be consequently decentralized (autonomy model) or centralized (integration model). If fiscal decentralization or centralization, however, is incomplete, citizens and their governments will have perverse incentives to spend excessively and to shift the debt/tax burden to the common pool of interconnected fiscal units. We illustrate our argument with an analysis of four distinct models of fiscal organization in the United States of America, France, Germany, and the European Monetary Union.
This contribution is the product of a fruitful collaboration of both authors. It is based on the PhD thesis in economics of Dr. David Ehmke supervised by Prof. Dr. Charles Blankart. The analysis of institutional congruence and the country- and EMU-analysis presented in this contribution will focus on the most distinct features of fiscal organization. For a comprehensive analysis with further bibliographic references see David Ehmke, Institutional Congruence: The Riddle of Leviathan and Hydra (Nomos 2019), especially Chapters III, IV, and V. See also Charles Blankart (2017), Chapters 26, 27, 28, 29, and 30, and Charles Blankart and David Ehmke (2015). We are very grateful to Prof. Dr. Richard Wagner for helpful comments on an earlier draft.
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Blankart, C.B., Ehmke, D.C. (2018). Fiscal Constitutions, Institutional Congruence, and the Organization of Governments. In: Wagner, R. (eds) James M. Buchanan. Remaking Economics: Eminent Post-War Economists. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-03080-3_8
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DOI: https://doi.org/10.1007/978-3-030-03080-3_8
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