Does Inequality Still Matter? Income Heterogeneity and Local Government Expenditure

Abstract

The concern that income inequality might have a deleterious impact on government goes back well over 2300 years. In recent times, the focus has settled on the threat posed by an association between inequality and government expenditure. In this work we investigate inequality and expenditure from the perspective of a jurisdiction wherein taxes have little association with incomes, taxation limitations apply and few goods are redistributive in nature. This context prompts us to adapt and propose an alternate explanation by which to investigate matters. Our work concludes with a reflection on the importance of testing old ideas in new contexts.