Revenue Sharing

Definition

Revenue sharing refers to the distribution or allocation of financial resources, typically tax revenue or other government-generated income, among different levels of government or between government and private entities. It is a mechanism used to ensure equitable access to resources and promote cooperation between various stakeholders.

5 Must Know Facts For Your Next Test

1. Revenue sharing was a key feature of the 'New Federalism' policies introduced by President Richard Nixon in the 1970s, aimed at devolving more power and resources to state and local governments.
2. The Community Development Block Grant (CDBG) program, established in 1974, is a prominent example of federal revenue sharing with state and local governments for community development initiatives.
3. The Secure Rural Schools and Community Self-Determination Act of 2000 provided revenue sharing payments to counties with national forests to compensate for lost timber revenue.
4. Revenue sharing arrangements can help address fiscal imbalances between the federal government and state/local governments, as well as between resource-rich and resource-poor regions.
5. Debates around revenue sharing often center on the appropriate balance between national priorities and local/regional autonomy, as well as concerns about fiscal discipline and accountability.

Review Questions

• Explain how revenue sharing relates to the concept of 'fiscal federalism' and the division of fiscal powers between different levels of government.
  • Revenue sharing is a key aspect of fiscal federalism, which involves the distribution of fiscal powers and responsibilities between the federal government and state/local governments. Revenue sharing programs allow the federal government to transfer financial resources to lower levels of government, helping to address fiscal imbalances and ensure more equitable access to public services across different regions. This promotes cooperation and coordination between the various stakeholders in the federal system.
• Describe the role of revenue sharing in the 'New Federalism' policies introduced by President Richard Nixon in the 1970s, and how it impacted the relationship between the federal government and state/local governments.
  • The 'New Federalism' policies of the 1970s, championed by President Richard Nixon, aimed to devolve more power and resources to state and local governments. Revenue sharing was a key feature of these policies, as it allowed the federal government to transfer financial resources to lower levels of government, giving them more autonomy and flexibility in addressing local needs. This shift in the federal-state relationship was intended to promote greater cooperation and responsiveness to local priorities, while also addressing concerns about the growing size and power of the federal government.
• Analyze how revenue sharing arrangements can help address fiscal imbalances between resource-rich and resource-poor regions, and the potential challenges or criticisms associated with such programs.
  • Revenue sharing programs can help address fiscal imbalances between resource-rich and resource-poor regions by redistributing financial resources from areas with greater fiscal capacity to those with lower fiscal capacity. This can ensure a more equitable level of public services and infrastructure across different parts of the country. However, revenue sharing arrangements can also be criticized for potentially reducing fiscal discipline and accountability, as local governments may become overly reliant on federal transfers rather than generating their own revenue. There are also debates around the appropriate balance between national priorities and local/regional autonomy, and concerns that revenue sharing may distort incentives for economic development and resource management.

Related terms

Fiscal Federalism: The division of fiscal powers and responsibilities between the federal government and state/local governments, often involving revenue sharing arrangements.

Intergovernmental Transfers: The transfer of funds from one level of government to another, which can include revenue sharing programs.

Equalization Payments: Payments made by the federal government to provinces/states with lower fiscal capacity to ensure a minimum level of public services across the country.