City Taxes, City Spending
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City Taxes, City Spending

Essays in Honor of Dick Netzer

Edited by Amy Ellen Schwartz

An illustrious group of economists contribute to this volume honoring Dick Netzer, the public finance economist well-known for his research on state and local taxation, the provision of urban public services, and non-profit organizations. Following in his tradition, the contributors apply microeconomics to real world problems facing urban areas and use statistical analysis to gain insight into practical solutions.
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Chapter 3: What a tangled web: local property, income and sales taxes

David L. Sjoquist, Sally Wallace and Barbara Edwards


David L. Sjoquist, Sally Wallace and Barbara Edwards* INTRODUCTION Throughout his career, Dick Netzer has been an ardent proponent of the use of the property tax for local governments. The discussion in his classic book, Economics of the Property Tax (Netzer, 1966), of the general sales tax as an alternative revenue source for local governments makes it clear that he believes it is an inferior alternative. However, over the past three decades, local governments have diversified their tax structures, and as a consequence local sales and income taxes have become an important part of the tax structure for many cities and other local governments across the United States. These changes in revenue structure have likely come about for two principal reasons: pressures on the existing system of revenue in the face of increased expenditure demands, and pressures to reduce reliance on the property tax. Many individuals suggest that cities adopt sales and income taxes to finance higher levels of expenditures (Anderson, 1994). Over the past several decades, reductions in federal funds, increases in federal and state mandates, and changes in the demand for public services have put increasing pressure on local governments to adjust old revenue sources and develop new, alternative forms of revenue. Large cities are a case in point: the demand for public services has increased as central cities have taken on more of the urban poor, suffered from increased crime (at least until recently) and sought to repair their infrastructure. The existence of limits, either...

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