A level playing field for cities

Urban economist Ed Glaeser argues that cities should get a level playing field:

Does the special role that cities play in the economy and society mean that cities need special treatment from state and national governments? No. Cities are strong. Give them a level playing field and they can compete robustly. However, cities shouldn't have to face a policy deck stacked against urban living. Urban firms and residents shouldn't have to pay a disproportionate share of the taxes needed to care for disadvantaged Americans. Suburbanites shouldn't get a free pass on the environmental damage created by a car-based lifestyle.

How are city residents unfairly taxed? For centuries, cities have disproportionately attracted the poor. In the 2000 Census, 19.9 percent of city residents were poor; only 7.5 percent of suburban residents lived in poverty.

Urban poverty does not reflect urban failure, but rather the enduring appeal of cities to the less fortunate. Poor people come to cities because urban areas offer economic opportunity, better social services, and the chance to get by without an automobile. Yet the sheer numbers of urban poor make it more costly to provide basic city services, like education and safety, and those costs are borne by the city's more prosperous residents. Taking care of America's poor should be the responsibility of all Americans. When we ask urban residents to pick up the tab for educating the urban poor, then we are imposing an unfair tax on those residents. That tax artificially restricts the growth of our dynamic cities.

I'm one of Glaeser's big fans.  He's exactly 83.4 times smarter than I am.  Still, I disagree with the italicized sentence.  Urban residents who heft additional tax burdens should be getting value in return.  If they aren't, they have the option of exit (except for the transit-dependent poor).  The higher costs should be capitalized into property value.  Lowering tax burdens would likely just make the fixed supply of urban property more valuable.  Tyler Cowen puts it better:

If there is any unfairness, maybe it is toward the people can't afford to live in desirable cities but would like to.  If we lower the property tax burden in cities, rents will rise and this problem will become worse rather than better.  The more general point is that urban land owners, not all residents, benefit disproportionately from good policy changes.  Urban improvements have unfair distributional effects by the very nature of city land.

Here's my two cents:  Adjusting the relative tax burdens and pricing externalities is not really a matter of fairness to urban residents.  But "anti-city" policies such as free roads and high tax burdens do deflect growth from the cities to the suburbs.  They dampen city growth or, worse, trigger a spiral of decline.  And that's a bad thing because of all of the positive things cities generate.

Our pro-suburban policies may not be bad for city residents, but they are bad for cities.

Comments

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Perhaps a better way of phrasing Glaeser's comment is with an example like public hospitals, or criminal justice. Atlanta, Chicago, and Los Angeles (among others) are facing huge bills related to maintaining a publicly operated, charity-care hospital in the urban core -- in all three cases, a regional resource that is widely abused by suburban governments that pay nothing towards charity care. Here in Chicago, where over $150M a year is given in charity care to suburban residents, we now pay 10.25% in sales tax -- very near what you'll find in some countries which have actual universal health care.

Similarly, Cook County incurs immense criminal justice costs prosecuting crimes (primarily drug-related) that have regional roots. Yet the suburban counties pay nothing. I suppose that Cook also benefits from additional "imported" revenue from being the region's central marketplace for other, more-wholesome goods -- including other intoxicants, like alcohol sold at restaurants and bars.

The nation's failure to find ways to finance its own drug war, or countless other unfunded mandates ranging from transit ADA compliance to the infamous deinstitutionalization that created today's intractable homelessness, should not result in undue fiscal burden upon those of us living in cities. Besides, is many Northern cities, the tax base per capita (for computing property, income, or sales tax) is far thinner in the city than in the suburbs.