Tax Base Sharing

            Unless you’re from Minnesota or you follow events in the Land of 10,000 Lakes, you probably haven’t heard of tax base sharing. 

            The Minnesota program, which began in 1975, was designed to alleviate disparities in the property tax bases between the Twin Cities and their surrounding suburbs.  What the program does is take 50% of the property taxes generated by commercial and industrial properties in the seven counties around and including Minneapolis and St. Paul, place them into a common fund and distribute them among the taxing districts in the seven county area in proportion to the population of each.

            So far, so good.  First, we need to appreciate a unique feature of the Minnesota political culture.  In addition to being relatively free of corruption,   Minnesota government agencies tend to minimize interference with municipal governments, even when they are providing significant funding to those local entities.  Even in Minnesota, there are some serious difficulties.  Most of these center on the fact that local taxing districts are able to spend money, while having little or no accountability to most of the taxpayers who foot the bill.

            For a brief moment, let’s rewind to 1946.  GIs were returning from World War II, marrying and having children.  Some returned to the neighborhoods they left in the inner cities, but many bought the new tract houses that were being built out in the suburbs.

            How did inner city politicians respond to this change?  Did they try to give middle class taxpayers a reason to remain in their cities?  Many officials were in denial.  They insisted that their cities were at their best ever.  Some went so far as to dismiss the data from the 1950 census showing migration from the cities to the suburbs as a statistical anomaly that would not be repeated in future censuses. 

            Middle class taxpayers saw the situation differently.   They saw their taxes rising, while the quality of their children’s schools and other city services deteriorated.  They got little or no response from a political class, which was focused on using their taxes to build support from favored constituencies.   They felt they had no choice but to pack up and leave the cities.  Since their votes didn’t seem to count for anything at election time, they voted with their feet.

            The migration from the inner cities that was dismissed as an anomaly in 1950 was confirmed by next six Federal Censuses.  How did the inner city political class respond?  Did they change their policies?  No, they doubled, tripled and quadrupled down on those policies.  Municipal services and schools grew progressively worse. Taxes climbed ever higher.  Migration to the suburbs continued each year.    The political class denounced middle class taxpayers for “deserting the central city” and concocted schemes to bring tax money from the suburbs to the city. 

            They even went so far as to accuse suburbanites who were employed in the cities of “taking wealth out of the city”.  I would point out that anyone in the private sector, who didn’t create more wealth than he took away from the job, wouldn’t have that job very long.  This idea is clearly lost on the inner city politician who is not subject to such performance measurements.

            Another idea they toss out frequently is that because the middle class taxpayers  “deserted” the inner city for the suburbs, that the suburbanites have a moral obligation to pay whatever additional taxes the inner city political class demands to support them in the style to which they have become accustomed. 

            That their own actions and policy prescriptions have destroyed their cities and driven middle class taxpayers out is completely lost on them!

            From this rich political stew emerge programs like Tax Base Sharing.   While the Minnesota program is limited in scope and constrained by the Minnesota political culture,  it’s important to ask how such a program would work in Illinois.

             Statements emanating from Chicago and Washington, point something much more ambitious.  It could take the form a program that would include a wider range of properties and/or a larger percentage of the taxes collected in the revenue pool.  There is also thw question of the area the tax base sharing pool would cover.  Would it be the six-county Regional Transportation or will the Chicago political class want to cast their net wider?  We really don’t know.   Needless to say, suburban taxpayers would get no say over how Mayor Emanuel and the Chicago Aldermen and their counterparts elsewhere would spend the money. We didn’t have much say about how the politicians spent our tax money when we lived in the city.  Why should we expect one now?   What ever happened to “No Taxation Without Representation”?

            We do have some experience with tax-base sharing.  It’s called the Regional Transportation Authority.  It was the brainchild of Mayor Richard J Daley back in the 1960s to create a regional body for the purpose of bailing out a failing and terribly mismanaged Chicago Transit Authority.  Forty years later, suburbanites are paying higher taxes to support a system most don’t and can’t use and the Chicago Transit Authority is as badly managed and larded with as much patronage and corruption as it ever was.  Is there any rational basis for concluding that a taxing authority with more extensive powers and access to more money would be any different?  

            Would giving Chicago more money to spend by taxing the suburbs more heavily help Chicago and Illinois or would it accelerate the economic and social decline of both?

            Before you dismiss what I’ve said and say, “This could never happen here!”, consider the experience of Detroit.  In 1950, it was one of the richest cities in the world.  It had the highest per capita income of any city in the United States.  Where is Detroit now?  Ho did it get from there to where it is now?