Where Are City Tax Bases “Eroding” To?

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Robert Swift says the state legislature will take up a few different bills to help PA’s struggling cities:

A bipartisan group in the Senate and House is working on a host of related issues, including an overhaul of the Act 47 program for fiscally distressed municipalities, municipal pension benefits, collective bargaining for public employees and the role of nonprofit institutions clustered in cities.

Since four legislative committees held joint hearings last fall on the future of Act 47, lawmakers involved in the effort to find solutions to the problems cities face with eroding tax bases and increased demand for services have emphasized its bipartisan nature.

I think the key question lawmakers need to be asking is “where are city tax bases eroding to?” It’s not like the tax revenue is just vanishing into thin air. It’s going somewhere.

Most of the time, the money is just moving around within the same county or metro region. To the extent that is true, that tax revenue is just following people when they move from cities to the suburbs, then there is a very simple solution: county tax bases.

With a county tax base, it wouldn’t affect city or township revenues at all when people move around within regions. There’d be no “erosion” of city tax bases, and cities alone would not be on the hook for clusters of tax exempt properties. All county tax payers would share that burden equally.

Regionalizing the tax base for local government is especially important right now as economic segregation is on the rise. In other states with county tax bases, it doesn’t really matter that much that rich people don’t want to live near the poors, since they’re still helping pay for the higher level of public services that low income areas require.

In PA it’s not like that. With 2500+ municipal governments, when people move across municipal boundaries from cities to townships, their income tax dollars follow them. This is the major reason why you see so many distressed older core cities in PA.

Regionalizing tax bases really should be the marquee issue for people who want more progressive taxation and less inequality at the local level, and this needs to be at the center of state reform efforts for these other bills to have any chance of working.

This entry was posted in Budget, Social Services.

4 Responses to Where Are City Tax Bases “Eroding” To?

  1. phillydem says:

    It’s not true that the tax base is just moving around, Jon. For ex, where I live, a small local college has been buying up real estate/houses for use as class rooms/dorms, etc. That property will now become tax exempt and thus the tax base will decrease even if no one moves in or out.

    The same is true in Philadelphia. The expansion of Penn, Temple, LaSalle, Drexel, Textile, etc., have taken large chunks of taxable property off the books.

  2. Jon says:

    Tax exempt properties are part of it, but suburban outmigration is also a big part. Central cities should share in the growth of a region’s earned income tax base, and that’s not happening now.

  3. tgb says:

    In Luzerne and Lackawanna county we would be picking up the financial malfeasance of generations. It is better they go into bankruptcy and then emerge with a right sized financially viabl government and municipal services. In Luzerne County they can not put in a timeclock system without a major to do. The Judicial branch will not comply. Just shows the arrogance.

    • Jon says:

      I would argue that the “financial malfeasance” is a symptom, not the cause, of distressed cities. The erosion of city tax bases is structural – happens automatically over time under the PA system of municipal finance. This leads cities to do risky desperate stuff to try to stave off decline. The solution is larger tax bases and regional local government.