Regional compet1tJon, urban fiscal problems, and the demands for more de­centralization of governmental activity have emerged as important national issues in virtually every industrialized country. Naturally, this situation has focused attention on the structure of intergovernmental systems, i.e., on the assignment of taxing powers and expenditure responsibilities among levels of government, on the degree of local auton­omy allowed in making fiscal choices, and on the structure of intergovernmental trans­fers. The last of these issues, particularly the important choices that have been made in designing systems of tax sharing and grants-in-aid, is the specific concern of this article.