The policy instructs ministers to justify keeping powers in Whitehall under a "local first" principle.
Downing Street confirmed that the 520,000-strong civil service will become smaller as decisions shift outward.
Northern Powerhouse Partnership Chief Executive Henri Murison noted that borrowing against future revenue could unlock large-scale infrastructure projects, such as an underground station at Manchester Piccadilly.
"It completely transforms what combined authorities would be able to do," Murison said.
Tees Valley Mayor Ben Houchen floated the idea of passing on financial benefits directly to residents.
He suggested he would use the income tax to hand out tax rebates to local people, according to reports.
Although thinkers at IPPR North described the policy as the most significant shift in funding in a generation, experts warned it could risk a "two-tier England" for areas without mayoral authorities.
The government is encouraging non-mayoral regions across Dorset, Somerset, Oxfordshire, Gloucestershire, Wiltshire, and Kent to form combined authorities to access the powers.
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Details on tax proportions remain set for the autumn budget.
