The Politics of City Revenue

The Politics of City Revenue

The Politics of City Revenue

The Politics of City Revenue

Excerpt

The field of taxation has been a subject of importance to political economists throughout the ages. More recently in the history of social science, this area has been the particular domain of economists and students of public finance, who have tended to concentrate their efforts on the fine tuning of a national economy. Their assumption has been that economic growth can take care of most of our problems. Moreover, public finance theory has also focused on the unitary state. Of course these students recognize the existence of a fiscal federalism; but the important issues, such as stabilization and income redistribution quite correctly are of national concern. Since much of the action is at the federal level, there is no economic theory of local finance to speak of.

As social scientists we want hard evidence to be able to draw inferences. This drive for statistical significance often directs us to aggregative approaches which in turn may mask solutions to local finance problems. Suppose a city needs money and an expert has been called in to help: What good is it for the expert to know that measures of wealth, such as assessed valuation, are related to levels of taxation? How can he use this information to acquire money for the city? Descriptive and explanatory aggregative analyses fall short of providing relevant information for fiscal first aid. For revenue gathering purposes, even less aggregative approaches which examine the economic effects and attributes of different taxes have limited utility. Tax shifting, demand effects . . .

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