First Post – Taxes, Cities, and Clarity

Not really sure where to start on this blog, but I thought I would address a series of interesting discussions that I’ve been having over the past couple years. Generally speaking it relates to how urban policy is addressed in this country and how tax dollars are allocated.

Cities and Money

My thinking on this subject began after reading an awesome Brookings Institute paper on the importance of metropolitan areas to the nation’s economy (hint: they are the most important jurisdictions in this country). It comes as no surprise that the major metropolitan areas in the US generate the lion’s share of the national GDP, house the vast majority of the population, and are the primary sources of innovation, value creation, etc.

US Metro Areas:

Where the article gets interesting is a discussion of the serious funding problems facing cities. Essentially, the federal government and states receive most tax dollars and then these are usually allocated back to states in an “even” geographic disbursement, with money going to all states and districts, rural or urban with the projects prioritized depending on the influence of legislators in state and federal government. As metropolitan areas have no official representation in this process, they generally get shafted, even though they are the primary source of most tax revenues and economic growth. Additionally, they are usually the regions in most pressing need of infrastructure improvements, such as sewer, roads, and rail.

One can argue that the geographic disbursement of funding to all areas, especially the rural and economically depressed, is in the interests of fairness and trying to level the playing field, but I think the issue is much more complex than this. While it’s true that rural areas often don’t have the funding for infrastructure, programs, and other improvements, they also have much smaller populations and arguably little reason for some improvements. Is it truly fair to build a road in a rural area that regularly serves 100 people over a road in a metropolitan region that serves 10,000? How do we measure the benefits and tradeoffs? It’s not very clear cut, and I believe that we should make sure that we recognize and address the needs of non-metropolitan communities, but I also think that we should not cater to the whims of the few to the detriment of the many.

American Government

Unfortunately, our political system as currently structured doesn’t allow for a practical distribution of resources in this form, and metropolitan areas generally get the shaft. (I’d like to point out that metropolitan includes significant rural areas. Metro does not mean densely urban. In fact, the new world model of cities is based on the interconnectedness of metropolitan regions encompassing huge and incredibly diverse land use types in a sphere of influence and connectivity. For example, Metro Bangkok sphere of influence encompasses a significant portion of the country of Thailand and by some estimates accounts for ~50% of the national economy)

Interestingly, I think that this discussion relates directly to one of the more hypocritical facts about the allocation of federal tax dollars:

RED STATES (who ostensibly hate taxes) ARE  SUBSIDIZED BY BLUE STATE TAX DOLLARS.

That’s right. According to repeated studies by the Tax Foundation, including the latest numbers from 2005 , the states that receive more federal spending than they spend in tax dollars (so for every $1 they pay the federal government, they get >$1 back) are almost all traditionally “red” states. On the flip side, those that get less than a $1 back on their dollar of taxes, are mostly traditionally “blue” states. Others have pointed out that a lot of swing states are right around the middle (nearly $1 back for a $1 taxed).

Homemade map:

Compare to this map of 2004 Election results:

What’s wrong with this picture?

Now there are lots of different ways to look at this information. One of my favorites is to recognize that the “big city, east coast, ‘liberal,’ Fake American” states are actually all the primary drivers of our economy and sacrifice the most to support the rest of the country (Texas being a red exception by nearly breaking even at $0.94 on the dollar). In general I’d like to note that these blue states are made of primarily of regular, hard working, blue collar Americans paying taxes, not just big corporations or liberal elites. This comes as no surprise really.

The flip side of this situation is that the “no taxes, libertarian, government-stay-out, ‘conservative,’ Real American” states are essentially all on welfare and could not maintain their current situations without significant subsidizes from the blue states. Again, no surprise really if you are acquainted at all with the vast subsidies in American agriculture, ranching, resource extraction, and traditional industries among other areas.

But like the discussion of metropolitan areas, this forces me to ask, is this really fair or smart? Again too, it’s highly complex, but as we struggle to get the economy going again, transition into a new economic structure that addresses our strengths in innovation, services, and advanced technology, and become more competitive in the global marketplace does it make sense to take resources from our strongest assets (metropolitan areas and blue states apparently) and spread them out to systematically underperforming investments (non-metro areas and red states possibly) while our infrastructure, education, health care, and other systems continue to deteriorate in the areas that need those resources the most?

What can we do?

I don’t think these answers are clear cut, and I completely recognize that there is more going on here that I could address in this post. What I am most interested in though, is our nation having an honest discussion about these issues (and all issues really). Honest discussion is one thing that I feel is completely lacking at most levels of government (although, disagree if you will, but I think Obama is trying to start these conversations).

Conservative leaders calling for lower taxes and less government should recognize what that would really mean to their constituencies, and if they are willing to make the tradeoffs, fine, but they can’t get the federal subsidies that go along with being a part of this system. Liberal leaders also need to be frank and stand up for their constituents and talk about these issues, instead of acting on the defensive all the time. Stop ceding ground to these falsely assumed beliefs about our country: taxes = bad, cities are pulling us under, liberal welfare states, etc.

In general, let’s all just please stop having knee jerk, antagonistic arguments, and start talking.

I think if politicians actually discussed where our tax dollars come from, how this money gets spent, and who the ‘winners and losers’ are, that we might start seeing a better public understanding. Along with better understanding and CLARITY (probably my favorite part of Taoism), the illumination of these issues, people can actually make informed decisions about where they stand, not just shouting back political and media talking points. With clarity, hopefully voters can bring pressure to have this system conform to a distribution based on the desire of the what we want, not what we’re told. This may mean that metropolitan areas continue to get left out, but I somehow feel that if people had a better understanding of our economy and our nation, we would start to support the right policies.

Or maybe I’m an optimistic asshole.

For Angelo:

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About Tony

Lives in Austin, Texas and likes music, art, philosophy, and random stuff.
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3 Responses to First Post – Taxes, Cities, and Clarity

  1. Carlisle says:

    Along similar lines, which she names hypocrisy, is a clip from Rachel Maddow on stimulus funding beneficiaries:
    http://www.msnbc.msn.com/id/26315908/vp/35340296#35340296

  2. Carlisle says:

    Tony,
    you might want to check this out if you haven’t yet:
    http://www.fivethirtyeight.com/2010/04/study-claiming-link-between-stimulus.html

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