The Theory of Fiscal Federalism

The Theory of Fiscal Federalism explains how different levels of government—like federal, state, and local—share and manage financial responsibilities and powers. It suggests that tasks should be assigned to the government level best suited for them, based on factors like efficiency, expertise, and accountability. Additionally, it examines how governments coordinate funding through taxes, grants, and transfers to ensure public needs are met, while maintaining economic stability and promoting equitable resource distribution. Ultimately, fiscal federalism aims to optimize the delivery of public services by balancing autonomy and cooperation among all government levels.