Mason Gaffney’s Testimony to the President’s Commission on Urban Problems

The higher tax rate in cities drives investors elsewhere, both home builders and industry, because whoever puts un a new building under this state of affairs tends to become a fiscal surplus generator, and no one really wants to be that: it means you pay more in taxes than you get back in services.

Since there are many competing jurisdictions, investors do not have to be fiscal surplus generators, as they can find a warm welcome in outer communities at lower tax rates.

So, as the central ities move into the downspin of this unfortunte circle, they tend to lose industry and, as a result, lose employment opportunities; at the same time they tend to gain old dwellings which attract people with low incomes who increase welfare costs. They are left with a high percentage of old buildings, which generate fiscal deficits, and fewer and fewer surplus generators with which to meet them.

Now if, to solve this problem, cities slash services in order to lower tax rates, they find cutting services and reducing the quality of schools also drive away population andincome and industxy.

What the cities need are more revenues without increasing the burden of taxation.