In this paper, small local governments compete for businesses and residents by offering public goods and services. They use taxes to try to balance things out, but they can't do it perfectly. The study shows that local governments often tax businesses and residents more than they should to make up for other taxes being too low. This can affect where businesses and people choose to locate. The research also found that local governments tend to provide more public goods than services, which can lead to a shortage of resources in some areas.