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Levels of democracy at the subnational level vary significantly in many federations, especially in developing democracies such as Argentina, Brazil, India, Mexico, Russia and South Africa. Instances of subnational authoritarianism are not uncommon in such nations. The literature on democracy and democratization, however, has mainly focused on regimes at the national level. Using quantitative evidence from the 24 Argentine provinces, I test theories of democracy that have been proposed by the national-level literature, and argue, drawing on rentier and fiscal theories of the state, that a key factor explaining variance in subnational democracy is the extent to which the incumbent in each unit benefits from rents. A burgeoning recent literature has studied the regime effects of natural resource rents (such as those produced by oil), and has suggested that, in very poor countries, foreign aid functions as a form of rent that hinders democracy. I argue that, in middle-income federations such as Argentina, the main source of subnational rents is the redistribution of tax revenues collected by the federal government. Rules and practices that disproportionally allocate these fiscal resources to poorer or smaller units provide their incumbents with generous rents that allow them to restrict democratic competition. Thus, fiscally progressive redistribution often results in politically regressive outcomes. A recursive OLS regression model shows that, in Argentina, the larger the federal fiscal (and oil) rents a province receives, the lower its level of democratic competition, even after controlling for modernization and other alternative theoretical accounts of democracy. ..PAT.-Unpublished Manuscript [ABSTRACT FROM AUTHOR]