Fiscal Illusion in State and Local Finances

Abstract

There is increasing pressure on state and local governments to be transparent. The ultimate goal of increased transparency is to improve the accountability and the efficiency of government through greater citizen awareness. However, despite the abundance of data now available at the click of a button, citizens are still distrustful and dissatisfied with government policies. Fiscal illusion may be at the root of the disconnect. Fiscal illusion suggests that the citizens systematically misperceive their tax burdens and subsequently the cost of government. These issues are discussed with an emphasis on the relationship between fiscal illusion and transparency in this essay.