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Taking charge: should New England increase its reliance on user charges?

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  • Robert Tannenwald

Abstract

New England relies less on user charges for its state and local revenues than any other region of the country. As a result, some policymakers maintain that increases in user charges would correct an \"imbalance\" in the regions revenue mix. However, the national mix of state and local revenues is not necessarily the best mix for the states of New England. The degree to which a state should rely on u. ser charges depends on the priorities of its policymakers among competing principles of taxation, the conditions under which each principle favors user charges over taxes, and the extent to which these conditions exist within the state. Since each state has its own distinctive values and traits, the role of user charges in financing state and local government should vary across states. ; This article explores the conditions under which user charges compare favorably to taxes according to the principles of efficiency, equity, and exportability. The author finds that, given conditions peculiar to New England, the regions low dependence on user charges makes sense in terms of ~11 three principles. Moreover, in several instances where New England states do rely heavily on user charges to finance a particular public service, circumstances favor user charge financing.

Suggested Citation

  • Robert Tannenwald, 1990. "Taking charge: should New England increase its reliance on user charges?," New England Economic Review, Federal Reserve Bank of Boston, issue Jan, pages 56-74.
    • Handle: RePEc:fip:fedbne:y:1990:i:jan:p:56-74
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    File URL: http://www.bostonfed.org/economic/neer/neer1990/neer190d.pdf
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    References listed on IDEAS

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    1. Feldstein, Martin S & Metcalf, Gilbert E, 1987. "The Effect of Federal Tax Deductibility on State and Local Taxes and Spending," Journal of Political Economy, University of Chicago Press, vol. 95(4), pages 710-736, August.
    2. Inman, Robert P., 1989. "The local decision to tax : Evidence from large U.S. Cities," Regional Science and Urban Economics, Elsevier, vol. 19(3), pages 455-491, August.
    3. Mieszkowski, Peter, 1972. "The property tax: An excise tax or a profits tax?," Journal of Public Economics, Elsevier, vol. 1(1), pages 73-96, April.
    4. Robert P. Inman, 1989. "The Local Decision to Tax: Evidence from Large U.S. Cities," NBER Working Papers 2921, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Bernd Huber & Marco Runkel, 2009. "Tax competition, excludable public goods, and user charges," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 16(3), pages 321-336, June.
    2. Nick Turner, 2005. "Across the region: six-state review," Fiscal Facts, Federal Reserve Bank of Boston, issue Win, pages 6-10.
    3. Wassmer, Robert W. & Fisher, Ronald C., 2002. "Interstate variation in the use of fees to fund K-12 public education," Economics of Education Review, Elsevier, vol. 21(1), pages 87-100, February.
    4. Yolanda Kodrzycki, 1994. "Privatization of local public services: lessons for New England," New England Economic Review, Federal Reserve Bank of Boston, issue May, pages 31-46.
    5. E. Matthew Quigley & Nick Turner, 2005. "Do New England state and local governments have too many employees, and are they overpaid?," Fiscal Facts, Federal Reserve Bank of Boston, issue Sum, pages 1-6,12.

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    Keywords

    New England; Taxation - New England;

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