Revenue Diversification in Large U.S. Cities
AbstractThe housing crisis and the Great Recession have placed tremendous fiscal pressure on the United States’ central cities. Cuts in state government fiscal assistance to local governments, combined with shrinking property tax bases, make it hard for local governments to maintain current levels of public services. Although the property tax remains the single most important own source of municipal government revenues, the decline in property values and the rising tide of foreclosures suggests that relying on more diversified local tax bases may strengthen the ability of cities to provide a range of public services for their residents. In this paper, we use a panel of data on the financing of the nation’s largest central cities from 1997 to 2008 to explore the role of revenue diversification in determining the level of general revenues of the United States’ largest central cities. Because expenditure responsibilities vary among city governments and because different levels and types of government play different roles, we develop the concept of constructed governments in order to allow us to compare the revenue-raising policies of large central cities across time and space. Our empirical results provide strong support for the hypothesis that a more diversified revenue structure generates more revenues than one that relies primarily on the property tax.
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Bibliographic InfoPaper provided by University of Toronto, Institute on Municipal Finance and Governance in its series IMFG Papers with number 05.
Length: 24 pages
Date of creation: Dec 2011
Date of revision:
Publication status: Published in hard copy and online
property tax; local government revenues; tax base; revenue diversification; constructed governments;
Find related papers by JEL classification:
- H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
- R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies
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