November 12, 2010

The Effects of Intergovernmental Grants on State Taxes

The Mercatus Center hosted a breakfast roundtable discussion with Dr. Russell Sobel of West Virginia University and the Mercatus Center on his recent paper, “Do Intergovernmental Grants Create Ratchet Effects in State and Local Taxes?” This paper addresses the question of whether federal funding in a given year results in states beginning new spending programs that then in the future require own-source revenue through state taxes to continue to fund them.

During this discussion Dr. Sobel addressed:

  • If federal grants like the American Recovery and Reinvestment Act (ARRA) can actually increase state and local taxes.
  • Whether intergovernmental grants create a permanent ratchet in the size of state and local governments in the United States.
  • The long term implications of federal funding to the states.