Föderaler Steuerwettbewerb durch Recht – verfassungstheoretische Grundfragen / Fiscal competition through legislation: Basic questions on constitutional theory

Fiscal competition between different government entities is known as “fiscal federalism” and has been an important element of the economic theory of federalism since the 1950s. Jurisprudence has only recently discovered the competition between organs of sovereign power. However, in jurisprudence, the idea of transferring conclusions from market analysis to state action meets several objections. Whether this reluctance is justified depends on to what extent competition - most importantly, fiscal competition - is inherent to the federal structure of a state. Constitutional theory offers to build a bridge between jurisprudence and economic research on fiscal federalism. Therefore two basic alternatives present themselves: competitive and cooperative federalism. The question of which assumption is closer to “real” federalism with respect to fiscal competition between the member states of a federal union is discussed on the basis of historical examples and comparative law. With that the three models of open competition, elimination of competition, and differentiated competition are illuminated. Differentiated competition proves to be the best model. It legitimizes the federal structure of the state and serves as a model for reform.