Find the part of the sentence that contains an error:
What makes the draft legislation especially contentious is not its proposed restructuring of fiscal authority per se, (1)/ but that it assumes, without empirical evidence, (2)/ a fiscal parity among states whose developmental starting points are (3)/ incomparable by any accepted standard. (4)

The correct option is (2).

Detailed Explanation:
The grammatical error occurs in section (2) because of a failure in parallel structure (parallelism) connected by the correlative conjunction pair "not... but...".

Understanding Parallelism with "not... but...":
When using correlative conjunctions such as not X but Y, both X and Y must belong to the exact same grammatical structure (e.g., noun phrase to noun phrase, or clause to clause).

Let's analyze the two parts being connected in the given sentence:
• Part X (following "not"): "its proposed restructuring of fiscal authority per se" → This is a noun phrase.
• Part Y (following "but"): "that it assumes, without empirical evidence..." → Section (2) introduces a clause starting with "that".

Because a noun phrase is paired with a clause, the construction violates parallel structure.

How to Correct the Sentence:
To make the sentence parallel, both sides should use matching structures:
1. Matching Noun Phrases: "...is not its proposed restructuring... but its assumption... of a fiscal parity..."
2. Matching Clauses: "...is not that it proposes to restructure... but that it assumes... a fiscal parity..."

Therefore, section (2) contains the grammatical error.