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Thursday
Aug092012

NCSL Speech

This past Tuesday I was invited to address a gathering of lawmakers and policy advisors at the National Conference of State Legislatures Annual Summit. I was able to record the audio and spliced it into the presentation slides to make this video.

Thank you to Katherine Schill for the generous introduction.

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Reader Comments (3)

Chuck, did you really call a STROAD "the futon of transportation options"? I love it!

August 10, 2012 | Unregistered CommenterColin

I'm not sure if this is the best place to bring this up, as it's rather general, but it seems relevant to the discussion in the video.

I looked into the city budgets of both Cincinnati and Blue Ash (a second-ring suburb developed mostly in the 60s and 70s, and made up mostly of office/industrial parks) for reasons that aren't important here. Now I will admit that I'm not particularly familiar with all the hoopla that goes on in city finance, but something really jumped out at me. Namely, in both cities, property taxes only make up single-digit percentages of their total income. Even if you eliminate some of the non-standard "business-type" activities like Cincinnati's ownership and revenues from the Cincinnati Waterworks which serves the whole county, and remove various one-time grants and entitlements, the share of property tax revenue is still less than 20% in both cases.

Now, this is Ohio where municipalities are able to levy earnings taxes, and both Cincinnati and Blue Ash do that. Blue as gets 75% of its revenue from their earnings tax. Cincinnati isn't quite so lopsided, but if you remove the aforementioned revenue from the waterworks, grants, etc., the earnings tax is still about 65% of general non-business revenues.

So my question is, has this come up in any of the curbside chats outside of Minnesota where local governments have a few more funding tools at their disposal? I understand that the Strong Towns message about return on investment ultimately doesn't care where the taxes come from. If the revenues (whether from property, income, sales, or other taxes) don't cover the expenditure on infrastructure necessary to support the built environment, then it's still a problem no matter what the taxing scheme is. This ignores the idea of property and other taxes as a disincentive to invest in improvements, which is a policy issue, not the raw income issue we're talking about.

Anyway, I wonder if this might not be a reason some people don't buy into the Strong Towns message, or think it doesn't apply to their situation. When there are so many revenue streams that change depending on the land use, then it's much more difficult to show how a particular development is insolvent. That residential subdivision doesn't net much in the way of property taxes, but the city collects earnings tax on the workers of the household...unless they work outside the city and the city in which they work also has an earnings tax, so some (but maybe not all) of that gets eliminated due to reciprocity agreements. The industrial park nets even less in property taxes because it's a bland boring industrial park, but a lot of people work there so the city gets a lot of earnings taxes for them, except for those who live somewhere else that has an earnings tax, as before, or if they're a contract consultant. No worries though, the commercial areas yield a portion of the county-levied sales taxes on top of the allowable earnings tax and property taxes which are better for retail areas anyway. I won't even get into the disparity of public services required for the different use groups.

See what I'm getting at? It's like the system is so complicated that you just have to hope it all works out in the end. As difficult as Minnesota's situation may be, at least it's easy to analyze.

August 11, 2012 | Unregistered CommenterJeffrey Jakucyk

Jeffrey, it might be possible to factor in the typical income levels of particular neighborhoods to calculate the impact of earnings taxes. This could help identify how much revenue is being captured by earnings taxes vs. expenditures in the neighborhoods in which the earners live, specifically identifying the true costs of infrastructure maintenance per property vs. the revenues generated by the property.

This brings up a good point that isn't mentioned in the presentation: our current development pattern isn't financially solvent on the large scale and isn't solvent in most instances close up, but it is viable when looking at extremely high value neighborhoods. It will be important to make sure that those who live in the few neighborhoods which manage to cover the costs of their own infrastructure remain focused on the systemic failure of the suburban experiment and the need for overall structural change, as opposed to a divisive 'who pays for what right now' argument.

August 14, 2012 | Unregistered CommenterSkyler Yost
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