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Fiscal Federalism

Among other reasons, examining fiscal federalism can prove useful when measuring shifts both in power and in decentralization. For example, if data indicates an increase in federal spending and a decrease at the state level then you can also assume that the power associated with that spending has shifted to the federal government as well to the detriment of the state. Another example is with the rise of cooperative federalism and unfunded mandates in that the federal government has often used fiscal power to increase centralization.  

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This dashboard looks at public opinion research regarding various fiscal issues, and it can also prove useful when examining the issues listed above. While the federal government may have consolidated more fiscal power, the public may favor more decentralized fiscal policies and practices. Likewise, the public may have a more favorable opinion of spending at the state or local level thus fostering more trust and confidence at those levels while increasing unfavourability for the federal government.

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Public Opinion Dashboard

Fairness of Taxes

Best (or Worst) Tax Usage

Government Services

International Comparison

Condition of Economy

Summary

Fairness of Taxes

This first section examines the fairness of taxes—both which tax is the most/least fair and whether or not the amount that individuals are paying is fair or not. This first series of graphs looks at the first of these questions. The first graph is from a study conducted by ACIR from 1972 to1993.  Federal income tax, as well as local property tax, tended to be seen as the least fair while state income tax and state sales tax had the lowest responses. The second graph is from a study by CATO where the same question is asked from 1983 to 2005, though federal social security is added to the mix. Surprisingly, this new addition tends to have results that are closer to the state taxes than to the federal ones. In the third graph, we combine the taxes from the two studies to help provide more visual continuity. This combination of data aids us in seeing that while there are fluctuations in the numbers, for the most part, the responses stayed in the same range for the 33-year span.

Fairnes of Taxes

This next graph asks the inverse of the previous question—which tax do you think is the most fair? This is also from ACIR and unfortunately only covers a span of three years. However, when comparing the data between the two studies, the patterns hold consistent. For example, federal income tax was seen as the most fair in 1972 which correlates with its lowest point of being considered unfair in the above graph. It should be noted that in both graphs, none of the taxes received responses high enough to constitute a majority of respondents.

This next graph considers if the amount the respondent was paying in taxes was "more than [their] fair share", "less", or "about the right amount" from 1997 to 2021. The two most popular responses were "about the right amount" and "more than fair share"—with each one having a majority of responses in various years. Looking at the response, it was even interesting to note that in 2019 there were two surveys conducted by Pew, with each having a different majority. The percentage gap between these two responses has remained between 17% or less over the years

Best (or Worst) Tax Usage

This next section examines how respondents perceive how their (tax) money is being used by the government. Not only do these graphs look at different measures such as waste, most value, or best usage as a whole, but several offer comparisons between different levels of government. Ekins and Samples noted, "Competition in a federalist framework should thus gives government powerful incentives to be more responsive to taxpayers, citizens, and businesses." While this series does not measure the correlation between perceptions and responsiveness (more on perceptions of government can be found in this dashboard), it is interesting to note that many of the responses do tend to favor decentralization with local government often receiving the most positive feedback followed by the state government.

 

This first graph from ANES asked respondents, "Do you think that people in the government waste a lot of money we pay in taxes, waste some of it, or don't waste very much of it?" Those who believe that "not very much" tax money is wasted have remained at or below 10% for the duration of the study. The responses for "a lot" and "some" follow an inverse relationship. "A lot" reached a peak in 1978 at 77% before being on the decline, reaching a low in 2002 at 48%, before rising again to reach 69% in 2020.

Best/Worst tax usage

This next graph by Cato looks at what level of government provides taxpayers the most value for their money. While at first, it seems like the federal government has the highest responses (until overtaken by local government), the combined responses of state and local government outnumber those of the federal government. As the authors' note, "Republicans (67%), Democrats (68%), and Independents (69%) all agree that state and local governments offer taxpayers the most value for their money. This also suggests that perception of federal government waste is not sufficient in convincing the public to devolve powers to the states" (Ekins and Samples).

Similar to the graph above, this graph looks at which level of government spends tax dollars the wisest. However, this graph adds in the options of "all of them" and "none of them." While it has similar trends with levels of government, the "none of them" response tended to receive responses that were similar or higher to "state" responses.

The following graph examines how much of each tax dollar respondents believed was wasted at the three levels of government. The federal government exhibited an upward trend, with it reaching above 50 cents in 2011. Local and state numbers have also continued to increase, though they remain at a lower level than the federal government.

This study by ACIR covers a shorter period (1989-1994), but highlights which level of government respondents felt they "get the least for their money". This graph supports the findings of the previous graphs, in which local and state governments are viewed more favorably than the federal government.

Government Services

Another way to examine fiscal concerns is to look at government-provided services. This can provide insight into whether individuals believe that those services should actually be provided by the government or if businesses or other organizations should be the ones to provide them. Or as the graphs below demonstrate, whether they feel that the trade-off between taxes and services is actually worth it.

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These next two graphs ask respondents whether they would prefer to increase services and taxes, decrease them, or keep them about the same. The first covers the period of 1975-1986 while the second covers 1993-2021. In the former, "keep taxes and services about where they are" was the most common response, followed by "decrease services and taxes." In the latter, the opposite was true, with "increase services and raise taxes" being the lowest response for both graphs.

Gov't services

Along a similar vein, in this next graph, respondents were asked to rank on a scale of 1-7 (1 cutting services and 7 increasing services), where they thought government services and spending should be placed.  4 was the most popular response - which would place it about keeping things as they currently are.  Surprisingly, "don't know" was also a popular choice throughout the duration of the study. In 2020, support for more services and spending reached 18%, which was an 11% jump from the previous year.  There is possible causation of this jump from the COVID-19 pandemic.

International Comparison

This next section compares fiscal federalism questions among three countries: Canada, Mexico, and the United States.  This first graph examines an earlier question (from which level of government do you feel that you get the most for your money?) and shows those who responded the "federal government".  Although there was only data available for one year, Mexico had the highest response rate at 38% in 2004.  Other years, the U.S. had the highest rate with responses over 25%.  However, none of the responses constitute a majority - showing that there is greater support for other levels of government.

International Comparison

This next graph continues the earlier question but expands it to other levels of government.  The federal government still receives the highest individual response with state and local falling at 25% and 23% respectively.  Even combining state and local government, it is only 10% higher than the federal government response. 

Canada demonstrates another dynamic - with the province level having the highest-ranking two out of three times (the other time the local level was the highest).  Suprisingly, the federal government outranked the local level twice (the exception being when local level was ranked first).  Overall though, there was more support for non-federal levels than with Mexico.

The United States also showed a different trend, with local government having the highest responses followed by the federal level, with "state" coming in last.  When comparing state and local against federal, the former group's total was 17-28% higher than the federal government showing a stronger support for decentralization than Mexico, but less than Canada.

Condition of Economy

Rather than examining taxes, this next section looks at the economy.  Two main trends are explored: the condition of the economy, and confidence in how leaders handle the economy.

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This next graph asks respondents whether they think that the economy will "get better", "get worse", or "stay about the same" over the next year.  Overall, respondents tend to be pretty neutral thinking that things will remain as they were.  One notable exception is in 1990 where there was a dramatic increase in those who thought that the economy would decline over the next year.  For respondents who did not think that things would stay the same, there tended to be slightly more support for those who thought that things would improve rather than decline.

Condition of economy

Similar to the above graph, the following chart goes over how respondents felt that the economy has changed over the past year.  Unlike above, where there was a single choice that (for the most part) was favored above the others, in this graph there was a different kind of pattern. There were several years where "gotten worse" had a clear majority (1980,1982,1990,1992, 2002, and 2008), but during other years, the responses were more distributed among all three choices.

This next question asked respondents to rate how much confidence they had that various individuals (i.e. the president, federal reserve chairman, governor, etc.) would do/recommend the correct thing for the economy.  The interactive graph below shows percentages for those who responded "a great deal" or "fair amount" in 2020 (if you hover over a certain bar, it will show the breakdown of that percentage by party).  The highest response rate was "governor in your state" at 68% (77%  of Democrats chose this response, followed by 63% of Republicans, and 62% of Independents). 

This next interactive graph (click on the tabs to move between slides) expands upon the previous graph by adding the other response (only a little/ almost none) and by showing party distributions.  Republicans had the highest responses (great deal/fair amount) for the Federal Reserve Chairman, President Trump, Republican leaders in Congress, and Treasury Secretary.  Democrats had the highest responses for Democratic leaders in Congress and the governor of their state. 

This next graph drills down even further - showing each economic actor on its own tab and showing the four responses. Click on the respective tabs (and arrows) to move between slides.

Key Takeaways

summary
Highlights

  1. When it comes to the fairness of taxes, respondents tended to view local or state taxes more favorably, and federal taxes as unfair.  When it comes to the amount of federal taxes paid (when considering what they received from the federal government) the majority response changed between paying "more than their fair share" and "about the right amount".  These differences are sometimes attributed to party ideology and income.

  2. With tax usage, a majority of respondents felt that "a lot" of their tax money was wasted in one survey, with another one showing that respondents felt that the federal government wasted around .50 of every dollar from 2009-2014.  Local government is viewed the most favorably with spending tax money, usually followed by state government (though in one study by CATO the federal government had higher ratings than state government and higher than local during some years).

  3. Similar to fairness of taxes, there tends to be a mixed response between keeping services and taxes about where they are or decreasing them.  For details on the break down of taxes and what they are used for, visit this article on fiscal federalism.

  4.  When it comes to comparing fiscal federalism among 3 countries, Canada had the highest preference for decentralization, followed by the United States, and then lastly Mexico.

  5. Looking at the condition of the economy, a majority of respondents felt that it would stay about the same for the upcoming year, while also feeling that it had gotten worse over the previous year.  Respondents were also more likely to feel confident in their state governor to do or recommend the best action for their state, followed by the federal reserve chairman and then the treasury secretary.

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