Vertical fiscal imbalance describes the situation where governments at different levels have mismatched revenue-raising capacity and expenditure responsibilities. In Canada, the federal government has broad taxation powers and fewer direct service delivery responsibilities, while municipalities have limited tax authority (primarily property taxes) but deliver expensive, growing services. This imbalance means municipalities struggle to fund responsibilities while federal and provincial governments have more diverse, growing revenue sources. Addressing vertical fiscal imbalance involves transfer payments from upper-level governments, expanded municipal revenue tools, or responsibility realignment. Municipal associations consistently raise vertical fiscal imbalance as a structural problem requiring intergovernmental solutions. The imbalance has intensified as municipal responsibilities have grown while revenue tools remain limited.