Distribution Function:

When this function is to be assigned the question does arise is whether multi units of government can render this function at different levels in a federal set-up.  If the same logic of decentralized provision of spatially limited public goods is applied to this function, citizens who are willing for a high degree of redistribution may favour jurisdiction A while those who will oppose may prefer jurisdiction B.  So the unit government A may adopt a highly progressive income tax coupled with a transfer system while the other jurisdiction B would use benefit or head taxes for financing public services. Though it looks sound and logical, there is every chance of its breakdown. For example, high-income people who oppose redistribution of income, on the assumption of free mobility of citizens would migrate to B while high-income people who prefer redistribution of income and wealth and poor people would choose to reside in A. Thus, people with high incomes find that the entire burden of taxation falls on them at the same time the degree of equalization would become small as large number of poor people congregate in A. So, the redistributive process becomes a failure if the local governments render the distribution function.

It is to be noted that the consumer mobility which is beneficial to sub-central governments as far as the provision of public goods tends to limit the redistributive function to be given to these governments. So it  needs to be carried out by the Central or federal governments. In other words, a national government appears to have greater latitude than the sub-national governments in carrying out redistributive programmes. Though the redistribution by the decentralized government cannot altogether be ruled out, the Central or national government is more capable and effective in carrying out the redistributive policies in the absence of the influence of any non-fiscal factors such as job location, prohibition of  in-and- out-migration etc.