State Policy Under Devolution: Redistribution and Centralization

Political theory argues redistributive spending is best made at higher levels of government, but under devolution, state policy becomes the most significant arena for redistributive activity. Using Census of Government data for 1992, this paper compares Federal and State aid to county areas and considers the role of state centralization of fiscal responsibility on local revenue raising efforts. Both the magnitude and redistributive nature of state aid are greater than federal aid. However, because state centralization has a large impact on reducing local fiscal stress, differences in state policy choices create a very uneven landscape of local tax effort.