When Geography Dilutes Accountability: Managerial Discretion and Fiscal Expansion in Local Government

Democratic accountability assumes that the citizens who bear the costs of government decisions can sanction the officials who make them. We identify a structural break in this assumption. When a city funds itself through taxes that fall partly on nonresidents (highway travelers, commuters, and regional shoppers who cannot vote in local elections) the electoral link between bearing costs and imposing sanctions weakens. Analyzing two decades of Texas municipal data (2000–2019) with two-way fixed effects and generalized synthetic control methods, we find that cities better positioned to shift costs onto nonvoters raise resident fiscal exposure more, after they adopt dedicated local sales taxes. This pattern is strongest for cities on or near major metropolitan areas and highways, whereas geographically isolated cities, where residents bear nearly all costs, show little change. It reverses the relief that classical tax-exportation theory predicts and reveals an accountability gap that funds discretionary fiscal expansion. The gap proves temporary: fiscal outcomes across contexts converge within six to thirteen years. Geography, we conclude, shapes democratic accountability as powerfully as electoral rules.