Fiscal Unions

Abstract

Building on recent research comparing the EU and the USA and drawing on Riker’s theory of federalism, this book explores the origins of fiscal unions. It investigates early American history to argue that an internal threat—e.g. a sovereign debt crisis leading to social unrest—triggers the emergence of federal taxing powers—i.e. a federal fiscal union. It concludes with four insights for the EU. First, fiscalization tends to be proceeded by an internal threat. Second, fiscalization can trigger the democratization of central institutions. Third, any proposed federal fiscal union to be successful should be proceeded by a wide debate. Finally, the main opponents of fiscalization should be offered clear benefits that will result from giving up some of their tax power in order for fiscalization to be successful. This is a first monograph to compare the American and European models of fiscal integration, offering two original contributions. It introduces the concept of fiscalization, which defines the emergence of a federal fiscal union. Then, by analysing the USA’s Confederation period and applying Riker’s theory using mainly unexplored primary sources, this book adds to the USA–EU comparative federalism literature. This research introduces the reader to the similarities and differences between the pre-Constitution USA and the contemporary EU with regards to their fiscal arrangements; a comparison of the arguments that were used while debating those arrangements; and finally the conditions under which the central level of government in systems of multilevel government is likely to acquire a power to tax.