The concept that government should be immediate near preferably, for participation as well as for effect and supervision, to one that is far and remote, but in all cases must in shape and form be one that shares power in conflict so to not permit nor encourage concentration of power in any one entity for fear of tyranny.
As a subfield of public economics, fiscal federalism is concerned with "understanding which functions and instruments are best centralized and which are best placed in the sphere of decentralized levels of government" (Oates, W.E. 1999. 'An Essay on Fiscal federalism', Journal of economic Literature, 37(3):1120-49 JSTOR).
This matters to politics in that it involves the distribution of government power.