This graduate thesis thoroughly analyzes the concept of federalism, its historical development and its implementation in contemporary societies, with a particular focus on the comparison between the European Union (EU) and the United States of America (USA). Federalism involves the division of power between different levels of government, allowing autonomy and cooperation between central, regional and local governments. The paper also examines fiscal federalism, which deals with the distribution of fiscal responsibilities and includes the analysis of revenue, expenditure and fiscal equalization mechanisms. The main theme of the paper is fiscal decentralization, which plays a crucial role in strengthening local and regional selfgovernment. Lower levels of government are financed through local taxes, fees and government transfers, enabling the provision of public services tailored to the needs of the community. Fiscal equalization plays a key role in reducing regional imbalances, but there are still challenges related to borrowing by local units and the need for better coordination of fiscal policy between different levels of government. The most successful forms of federalism are found in countries where there is a balanced relationship between central and regional government, allowing for efficient governance and economic stability. In contrast, countries with centralized systems of government are often more prone to corruption and less efficient economic management. The paper highlights how effective administration and coordination at multiple levels of government can contribute significantly to economic development and stability, which is essential for a successful federal system. A comparative analysis of the EU and the US is used to show how different forms of federalism and their implementation can affect the system's ability to meet the challenges of modern governance and sustainable development.