Fiscal illusion at the local level: An empirical test using Australian municipal data

This paper seeks to extend the literature on the empirical analysis of fisc al illusion in two ways. First, it provides a simultaneous test of four spe cific hypotheses subsumed under fiscal illusion, namely the revenue-complex ity, renter illusion, debt illusion and flypaper models. And second, it add s evidence drawn from the Australian institutional milieu to existing empir ical work which has an overwhelming North American focus. Using 1991 data f rom 46 local government authorities in Tasmania, the results suggest signif icant support for revenue-complexity, debt illusion, and the degree of indi rectness of the revenue system.