Fiscal federalism and democracy: The challenge of distributive justice

Arthur Benz

Chapter 6 in Understanding Federal Democracy, 2026, pp 97-119 from Edward Elgar Publishing

Abstract: Since citizens are taxpayers and consumers of public goods, fiscal policy is a salient matter in democracy. In a federal system, the distribution of governments’ authority to raise revenues and the imbalance of their fiscal capacities cause permanent conflicts, whilst common pool problems relating to taxation and public borrowing, as well as imbalances of revenues and expenditures require policy coordination between federal and regional governments. Therefore, tensions between democracy and intergovernmental politics are particularly evident. Distributive effects of policies intensify these tensions. They especially materialize in intergovernmental politics that aim at a fiscal balance between levels of government and fiscal equalization among regional governments. The chapter compares taxation, public borrowing, revenue-sharing and fiscal equalization to explicate how federal democracies cope with redistributive policies and perform in terms of distributive justice.

Keywords: Public Borrowing; Federal Grants; Fiscal Equalization; Fiscal Federalism; Revenue-Sharing; Taxation (search for similar items in EconPapers)
Date: 2026
ISBN: 9781035361489
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