Limits of Property Taxes and Charges: City Revenue Structures After the Great Recession

2017 ◽  
Vol 55 (1) ◽  
pp. 185-209 ◽  
Author(s):  
Yunji Kim
Keyword(s):  
Public Finance ◽  
Great Recession ◽  
Local Governments ◽  
Property Tax ◽  
Property Taxes ◽  
Historical Trends ◽  
Stable Property ◽  
The Great Recession ◽  
Expenditure Limitations ◽  
Urban Places

Public finance theories argue local governments should primarily use broad-based and stable property taxes. However, the housing bust after the Great Recession challenges this argument, and historical trends show cities have heavily relied on charges since the late 1970s. Using 2012 Census of Governments data for 2,396 cities, this article explores which cities rely more on charges and the links between property tax dependence and city stress. Regression results show property tax dependence is linked to capacity, while charges dependence is linked to stress. Charges can be a useful revenue tool for cities under stress, but they may be regressive and their use may be limited to urban places with services that can be charged for and cities with growth pressures and less stringent tax and expenditure limitations. Absent equalization efforts from higher-level governments, barriers to using charges, which cities have little control over, may increase inequality among cities.

Municipal response to the Great Recession

2018 ◽  
Vol 30 (4) ◽  
pp. 384-401 ◽  
Author(s):  
Cary Christian ◽  
Jonathan Bush
Keyword(s):  
Great Recession ◽  
Rural Areas ◽  
Property Tax ◽  
Research Attention ◽  
Content Type ◽  
Service Levels ◽  
The Great Recession ◽  
Financial Condition ◽  
The Impact ◽  
Practical Implications

Purpose The purpose of this paper is to examine the impact of the Great Recession on small- to medium-sized municipalities within the states of Georgia and Florida using a newly developed set of quantitative indices. Design/methodology/approach An examination of the methods and strategies utilized by individual cities to maintain public service levels despite distressed revenues is performed. From the data, performance measures are developed and used to evaluate the efficacy of the various strategies used by the cities. Outcomes of Georgia municipalities were compared to similarly sized Florida municipalities to study how underlying differences in tax structures and economies might have affected those outcomes. Findings Georgia and Florida municipalities relied on very different strategies for surviving the recession and its aftermath. Enterprise activities were critically important in both states with transfers to or from governmental activities rationalized in various ways. While Georgia is generally anti-property tax, more than half the Georgia municipalities relied on property tax increases to survive. Municipalities were unable to count on increased intergovernmental revenues during the recession. Finally, even with a tourist activity advantage, Florida municipalities fared only marginally better during and just after the recession, and fared worse four to six years post-recession. Practical implications The measures developed in this study provide a new, customizable methodology for the evaluation of financial condition that does not require in-depth comparisons to peers. Social implications Small- and medium-sized cities, and especially those in rural areas, are worthy of targeted research to better understand their unique problems. Originality/value This research is novel in utilizing a fiscal condition methodology that can be applied to a single municipality and does not require comparisons to peers for validity. However, it represents a very intuitive and customizable tool for making comparisons between municipalities of any size when such comparisons are desired. Additionally, the focus of this study is on small- to medium-sized municipalities which generally do not receive as much research attention as larger cities.

scholarly journals Leviathan or Public Steward? Evidence on Local Government Taxing Behavior from New York State

2018 ◽  
Vol 49 (4) ◽  
pp. 671-693 ◽  
Author(s):  
Austin M Aldag ◽  
Mildred E Warner ◽  
Yunji Kim
Keyword(s):  
New York ◽  
Local Governments ◽  
Fiscal Federalism ◽  
New York State ◽  
Property Tax ◽  
General Purpose ◽  
Fiscal Stress ◽  
York State ◽  
Expenditure Limitations ◽  
Logistic Regressions

Abstract Fiscal federalism argues local governments compete to provide optimal tax-service bundles as responsible public stewards. In contrast, Leviathan theories argue tax and expenditure limitations (TELs) are necessary to make local governments fiscally responsible. We analyze local taxing behavior in New York State, which implemented a levy limit in 2012 that allows legislative overrides with 60 percent vote of the local governing board. Our 2017 survey of all general-purpose local governments measured fiscal stress, service responses, and local political attitudes and found 38 percent of municipalities voted to override. Logistic regressions show local governments that have more fiscal stress, weaker property tax bases, higher need, and higher employee benefit costs are more likely to override. These findings support fiscal federalism, as local governments that override are pushing back against state policy in order to respond to local needs. TELs introduce unnecessary rigidity and run counter to the precepts of fiscal federalism.

Fiscal Secession: An Analysis of Special Assessment Financing in California

2018 ◽  
Vol 56 (2) ◽  
pp. 480-512
Author(s):  
Mathew D. McCubbins ◽  
Ellen C. Seljan
Keyword(s):  
Ethnic Diversity ◽  
Local Governments ◽  
Property Tax ◽  
Property Taxes ◽  
Single Family ◽  
Progressive Taxation ◽  
Geographic Ranges ◽  
Alternative Method ◽  
Local Services ◽  
Special Assessment

Special assessments on property are a fiscal innovation employed by many local governments. Unable to raise property taxes due to limitations, localities have turned to these charges as an alternative method to fund local services. In this article, we seek to explain differential levels of special assessment financing through the analysis of property tax records of a sample of single-family homes in California. We theorize that special assessments, as opposed to other forms of taxation, will be used when residents hold anti-redistributive preferences. We show that annual assessment payments are correlated with the ethnic diversity and median family incomes of the census places within which they are located. We also show that assessments with narrow geographic ranges are levied extensively on expensive homes in poorer cities. We discuss the implications of special assessments for progressive taxation and the potential for fiscal secession within U.S. cities.

scholarly journals Did Cuts in State Aid During the Great Recession Lead to Changes in Local Property Taxes?

2014 ◽  
Vol 9 (4) ◽  
pp. 383-416 ◽  
Author(s):  
Rajashri Chakrabarti ◽  
Max Livingston ◽  
Joydeep Roy
Keyword(s):  
School Districts ◽  
Great Recession ◽  
Property Tax ◽  
Negative Relationship ◽  
Local Property ◽  
Relative Increase ◽  
State Aid ◽  
Tax Rate ◽  
The Great Recession ◽  
Recession Period

The Great Recession led to marked declines in state revenue. In this paper we investigate whether (and how) local school districts modified their funding and taxing decisions in response to state aid declines in the post-recession period. Our results reveal school districts responded to state aid cuts in the post-recession period by countering these cuts. Relative to the pre-recession period, a unit decrease in state aid was associated with a relative increase in local funding. To further probe the school district role, we explore whether the property tax rate, which reflects decisions of districts facing budgetary needs, responded to state aid cuts. We find, relative to the pre-recession period, the post-recession period was characterized by a strong negative relationship between property tax rate and state aid per pupil. We also find important heterogeneities in these responses by region, property wealth, and importance of School Tax Relief Program revenue in district budgets.

scholarly journals The Great Recession and Public Education

2019 ◽  
Vol 14 (2) ◽  
pp. 298-326 ◽  
Author(s):  
William N. Evans ◽  
Robert M. Schwab ◽  
Kathryn L. Wagner
Keyword(s):  
Public Education ◽  
Great Recession ◽  
Property Tax ◽  
State Governments ◽  
School Employees ◽  
The Great Recession ◽  
The Impact ◽  
Public Education Finance ◽  
Work First ◽  
School Spending

We examine the impact of the Great Recession on public education finance and employment. Five major themes emerge from our work. First, nearly 300,000 school employees lost their jobs. Second, schools that were heavily dependent financially on state governments were particularly vulnerable to the recession. Third, local revenues from the property tax actually increased during the recession, primarily because millage rates rose in response to declining property values. Fourth, inequality in school spending rose sharply during the Great Recession. We argue, however, that we need to be very cautious about this result. School spending inequality has risen steadily since 2000; the trend in inequality we see in the 2008–13 period is very similar to the trend we see in the 2000–08 period. Fifth, the federal government's efforts to shield education from some of the worst effects of the recession achieved their major goal.

Die Entwicklung des „Steuerstaates“: Ursprung, Aufstieg und Ende eines finanzwirtschaftlichen Fortschrittsparadigmas

2021 ◽  
Vol 62 (2) ◽  
pp. 505-552
Author(s):  
Alexander Leipold ◽  
Sebastian Huhnholz
Keyword(s):  
Public Finance ◽  
Great Recession ◽  
The Great Recession ◽  
Democratic Capitalism ◽  
Fiscal Sociology ◽  
Tax State ◽  
Economic Control ◽  
The Subject ◽  
Central Paradigm ◽  
Advanced Capitalist

Abstract For decades, the Schumpeterian tax state was considered the central paradigm of Fiscal Sociology. However, it increasingly fails to meet many of the conceptual challenges of contemporary public finance. To demonstrate this, the paper undertakes a double re-contextualization of the discourse on public finance. Its development is traced back to evolutionary thinking, which Joseph Schumpeter updated around 1918. However, and following the rise of democratic capitalism after 1945, thinking about the tax state became intertwined with economic control. Its socio-political specifics were marginalized. Since the Great Recession of 2008/2009 and widening fiscal crises in advanced capitalist economies, this discursive narrowing has again become the subject of political and economic controversies.

US sub-national governmental response to the ‘Great Recession’: implications for the ‘equitable distribution of the costs and benefits of public services’

2015 ◽  
Vol 83 (3) ◽  
pp. 425-442 ◽  
Author(s):  
Blue Wooldridge ◽  
Heidi Jane M. Smith
Keyword(s):  
Great Recession ◽  
Local Governments ◽  
Work Force ◽  
Fiscal Stress ◽  
The Great Recession ◽  
Goods And Services ◽  
Public Managers ◽  
Global Recession ◽  
State And Local ◽  
Subnational Governments

Experts suggest that when faced with fiscal stress public managers can engage in three coping practices: an actual cutback in services, expansion of existing financial resources, or reduction in work force. During the Great Recession (2007–2012), US subnational governments utilized all three of these practices. The purpose of this article is to identify coping mechanisms used by state and local governments to respond to the Great Recession, and identify approaches to minimize the negative and disproportionate impact of these actions on women, minorities, and the economically disadvantaged. The authors provide specific examples of tactics employed by US subnational governments in response to fiscal stress and evaluate the equity of their consequences on the distribution of goods and services. A review of the concept of social equity, its related literature, and an analysis of the disparate impact of coping practices on underrepresented groups is provided. Finally, the article presents mitigating strategies in order to reduce the regressive impact of these coping practices on the vulnerable populations. Points for practitioners This article identifies ‘coping’ strategies used by US Subnational Governments in response to the Global Recession. It presents the inequities caused by these responses and suggests some ‘mitigating’ strategies to reduce the regressive impact on the disadvantaged.

An Open Systems Model of Local Government Forecasting

2017 ◽  
Vol 48 (5) ◽  
pp. 476-489 ◽  
Author(s):  
Vincent Reitano
Keyword(s):  
Local Government ◽  
Great Recession ◽  
Local Governments ◽  
Open Systems ◽  
Local Level ◽  
Forecast Accuracy ◽  
The Great Recession ◽  
Systems Model ◽  
Financial Uncertainty ◽  
Information Set

Local governments use single source forecasts to inform decision making, which can constrain their ability to prepare for and respond to financial uncertainty. This unique context may have increased the challenges faced by governments at the local level through economic downturns such as the Great Recession. Given this concern, which has yet to be addressed in the literature, this article develops an open systems model of local government forecast accuracy, which can be tested across any type of local government. This article tests the model with a panel of special purpose governments at the local level, specifically school districts in Pennsylvania, from 2003 through 2013. Estimation of the model with longitudinal analysis shows that government forecasters at the local level consider internal and external factors when forecasting own-source and intergovernmental revenue streams. In particular, a mix of institutional, financial, and political factors are associated with forecast accuracy. Forecasters at the local level also considered the role of economic shocks, as evidenced by decreased expectations for own-source revenue through the Great Recession. Collectively, these findings demonstrate that they consider a complex and multifaceted information set, which includes both internal and external determinant factors of forecast accuracy at the local level. These factors can prove critical to increasing forecast accuracy in context of the financial uncertainty experienced through the Great Recession.

Modeling Fiscal Stress and Contracting Out in Local Government: The Influence of Time, Financial Condition, and the Great Recession

2017 ◽  
Vol 48 (6) ◽  
pp. 565-583 ◽  
Author(s):  
Antonio M. López-Hernández ◽  
José L. Zafra-Gómez ◽  
Ana M. Plata-Díaz ◽  
Emilio J. de la Higuera-Molina
Keyword(s):  
Great Recession ◽  
Local Governments ◽  
Fiscal Stress ◽  
Contracting Out ◽  
The Great Recession ◽  
Financial Condition ◽  
Precise Understanding ◽  
The Impact ◽  
The Relationship

Various studies have analyzed the relationship between fiscal stress and contracting out, but have failed to achieve conclusive results. In this article, we take a broad view of fiscal stress, addressed in terms of financial condition and studied over a lengthy period (2000-2010). The relationship between fiscal stress and contracting out is studied using a dynamic model, based on survival analysis, a methodology that enables us to take into account the effect of time on this relationship. As this study period includes the years of the Great Recession (2008-2010), we also highlight the impact of this event on the fiscal stress–contracting out relation. The results obtained suggest that taking into account the passage of time and conducting a long-term assessment of financial condition enable a more precise understanding of this relation. We also find that the Great Recession reduced the probability of local governments’ contracting out public services.

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