The US has experienced three major, differing systems of government finance. The period before 1839 was mostly financed through land sales and chartering corporations. The period between 1839 - 1933 was marked by local governments financed through property taxation, and the period after 1933 was marked by a national government financed via income taxes.

“As shown by Wallis (2000), the US has experienced three major and very different systems of government finance, and one of them, over an entire century, in fact corresponded quite closely to what we propose in this paper. Furthermore, the transitions between these systems happened quite rapidly at times of major economic upheaval, specifically in response to the depressions of 1839 and 1933, and the aftermath of COVID-19 has at least the potential to become a similarly large turning point. Wallis (2000) shows that government finance in the period before 1839 was dominated by state governments that financed themselves predominantly through land sales (and through chartering corporations), the period between 1839 and 1933 was dominated by local governments that financed themselves predominantly through property taxation, and the period after 1933 was dominated by the national government that financed itself predominantly through income taxes.”

empirical


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