A Internet Argument Ender about local tax rates
April 24, 2019 11:55 AM   Subscribe

 
I especially like the footnote. Can I have that tattooed on my forehead? (tldr; skim to the bottom).
posted by jb at 12:53 PM on April 24 [27 favorites]


I think analysis like this is particularly useful and should be information released by government agencies or public think-tanks.

Yes, I know different cities and municipalities have different challenges and different drains on their budget, but it is still helpful to have a baseline and know just where your hometown compares, especially in these days where budget cuts are the norm.
posted by sardonyx at 1:16 PM on April 24 [2 favorites]


I approve of this.
posted by Eyebrows McGee at 1:26 PM on April 24


Yes, regarding the footnote - I often say something similar:
One of these things is not like the other.
Businesses are in business to make a profit. To make money.
Government "business" is to spend money - that is, to take their revenues (aka taxes, for the most part) and parcel them so the do the most for the common good; like roads, police, fire, etc.
posted by dbmcd at 1:36 PM on April 24 [8 favorites]


As someone who does not have a great relationship with numbers, I always appreciate seeing someone who does, do their thing. Also, I really, really, like your footnote about why government should not work like a business--especially since we are seeing why it is so problematic being played out on our (USA) national stage.
posted by agatha_magatha at 1:36 PM on April 24 [1 favorite]


Of course government and business are different, but that doesn't mean that there aren't significant similarities:

- The product governments "sell" are services, infrastructure, etc. If the customer (taxpayer) doesn't feel like they are getting value for their money (taxes) they are free to leave and patronize another government. If someone in Kingston thinks they're getting ripped off, there is nothing stopping them from taking their tax revenue from Kingston to Windsor. That has an impact on everyone in Kingston. Nothing exemplifies this more than this post, comparing tax rates between cities. That could be a comp table looking at stocks, or a table comparing the cost of a new car. People have choices as to where to live, work, and pay tax.

- Economic/market principles apply to government just as they do to business. Issuing municipal bonds is just like corporate debt. Getting overlevered and having a downgraded credit rating affects your ability to borrow/fund services, etc, just like it impacts a business's ability to grow, pay its debts, whatever. It has a real impact on real people.

- In a very real way, citizens of country (maybe moreso than residents of a city) are like shareholders of a corporation. We vote for representatives, just like shareholders of a business vote for the board of directors. Those representatives should be looking out for our best interests, executing on the platform they were elected on; again, similar to a corporate BoD. The representatives we elect have a material impact on our "investments" - the $$$ we've paid in taxes, the roads, the schools, everything. Not to mention our share in social security, pensions, EI, oil revenue, sovereign wealth funds, whatever the case may be. Those, in theory, are our dividends, our cash distributions. And we certainly shoulder our share of the debt, one way or another.

I get it, business is dirty filthy capitalism and government is pure angelic unselfish public service. But they share many aspects of structure and organization, and both live in the same universe of economic forces. Most jurisdictions (especially municipalities) would be better served if they were run more like some types of businesses rather than short-sighted, economically illiterate pseudo-mafias.
posted by Mirax at 2:36 PM on April 24


Here in NZ we do local taxes ('rates') differently - first there's a 'services' component - a fixed per-property fee (water street lighting etc) - and a property valuation related component.

That property valuation related component is not calculated as a percentage of the value, instead the city decides "we want to raise X$" and then adds up the valuations of all the properties in the city and you pay the proportion of that total that your property represents.

This means that if the city needs to raise X$ in a year and your bill is $2000, and in the next year all the property's values double and the city is still raising X$ you still pay $2000
posted by mbo at 2:42 PM on April 24 [1 favorite]


> In a very real way, citizens of country (maybe moreso than residents of a city) are like shareholders of a corporation. We vote for representatives, just like shareholders of a business vote for the board of directors. Those representatives should be looking out for our best interests, executing on the platform they were elected on; again, similar to a corporate BoD. The representatives we elect have a material impact on our "investments" - the $$$ we've paid in taxes, the roads, the schools, everything. Not to mention our share in social security, pensions, EI, oil revenue, sovereign wealth funds, whatever the case may be. Those, in theory, are our dividends, our cash distributions. And we certainly shoulder our share of the debt, one way or another.

The key distinction that you're glossing over here is that shareholders have votes in proportion to the number of shares that they hold, whereas voters have exactly one nontransferable vote per voter.

The similarities between shareholders and voters are relatively unimportant and trivial, and boil down to "they are alike because both groups cast votes to make decisions." The differences, on the other hand, are deep and significant. In the shareholder model a few "voters" can easily override the will of the majority, should they happen to have more voting shares than the majority. In the democratic model, on the other hand, all voters have precisely the same number of votes, and so winning an election requires amassing (by hook or by crook) an actual numerical majority of voters.

Because these are radically different models, when one uses the shareholder concept to discuss democratic decision-making processes one is missing the point altogether.
posted by Reclusive Novelist Thomas Pynchon at 3:35 PM on April 24 [11 favorites]


(which is not by any means to say that the United States is a democracy. Although we have a nominally democratic one-person-one-vote electoral process at the heart of our system of governance, in practice the leverage that the extremely wealthy have over our media outlets, political parties, legal system, and individual elected officials results in a de facto shareholder system.)
posted by Reclusive Novelist Thomas Pynchon at 3:38 PM on April 24 [1 favorite]


Because these are radically different models, when one uses the shareholder concept to discuss democratic decision-making processes one is missing the point altogether.

There are plenty of business models that have only 1 vote per shareholder, or restrictions on voting (co-ops, trusts, crown corporations, not-for-profits, etc) for starters, but beyond that, regardless of the methodology of electing representatives, as a government you cannot avoid the fact that you have to manage debt, manage revenue generation (tax collection, "sales"), and manage "customer satisfaction" if you are to be successful as an elected government, and overall as a jurisdiction.

Fundamentally, the decision making process should be pretty similar for most economic questions. Very few decisions by a city council or any other government involving money can be made in a vacuum. "Is this in the best interest short/long term for the people I represent"? What are the costs/consequences? What will the impact on our balance sheet be? How will taxpayers respond? Will they leave, reducing our revenue and ability to provide services, or will we attract more taxpayers? All sounds pretty business-y to me.

Think less Goldman Sachs or Amazon as the "business" comp I'm suggesting, and more Ontario Hydro or the LCBO, or credit unions, or co-op insurance companies, etc.
posted by Mirax at 4:01 PM on April 24 [1 favorite]


> but beyond that, regardless of the methodology of electing representatives, as a government you cannot avoid the fact that you have to manage debt, manage revenue generation (tax collection, "sales"), and manage "customer satisfaction" if you are to be successful as an elected government, and overall as a jurisdiction.

Indeed, and a government has to manage something like these things regardless of whether there's any electoral process whatsoever. Monarchies, autocracies, corporations, and democracies all have to deal with, well, call them group-level metabolic functions — they all have to make decisions about managing resources in such a way that the group doesn't collapse. This strikes me as a trivial similarity. Meanwhile, the real and significant distinction between an autocracy and a democracy is that the group whose satisfaction matters is much smaller in the former case than in the latter; autocracies are run to maximize the satisfaction of the autocrat, with the satisfaction of anyone who isn't the autocrat mattering only to the extent that they can make plausible threats to overthrow the entire system.

> Think less Goldman Sachs or Amazon as the "business" comp I'm suggesting, and more Ontario Hydro or the LCBO, or credit unions, or co-op insurance companies, etc.

Co-ops, state-owned utilities, credit unions, and so forth are zebras (relatively rare, relatively non-influential, typically not the first thing you think of when you think of equines).

Conventional corporations are horses.

More to the point, the "shareholder" organizations that you identify, that are run on more or less democratic lines, were mostly set up by, well, radicals, who aimed at establishing democratically-controlled organizations to counterbalance (or ideally supplant) capitalist-controlled organizations.

It's a little bit dishonest to insist on the similarities between corporate decisionmaking and democratic decisionmaking, then to further insist that when we think of shareholder-controlled organizations, we should specifically think of those relatively rare organizations where the voting processes more closely resemble democratic decision-making processes than they resemble the decision-making processes in most shareholder-controlled organizations.
posted by Reclusive Novelist Thomas Pynchon at 4:25 PM on April 24 [7 favorites]


basically by your definition, if armed workers' councils seized control of all productive property, established a condition of dual power wherein both the councils and the bourgeois-electoral government had valid claims to legitimacy, and then abolished the bourgeois government by force and established a dictatorship of the proletariat, why, that would be exactly like capitalism.

Of course all modes of group decisionmaking involves making decisions about limited resources and the allocation of same. This does not therefore make all forms of group decisionmaking equivalent.
posted by Reclusive Novelist Thomas Pynchon at 4:36 PM on April 24 [4 favorites]


mbo that is how property taxes work in Ontario as well. The city sets a budget and the rate is created based on the budget and assessed values of the properties. Rates have been decreasing for years in most municipalities but the amount taxed has increased and on the property tax bill it will show the difference in taxes paid from the previous year to the current one so that people don't get tricked into thinking their taxes have decreased when they really haven't.
posted by any portmanteau in a storm at 4:56 PM on April 24


a government has to manage something like these things regardless of whether there's any electoral process whatsoever

Right! Just like a private business or sole proprietorship!

Co-ops, state-owned utilities, credit unions, and so forth are zebras (relatively rare, relatively non-influential, typically not the first thing you think of when you think of equines).

They are all businesses, and operate on a business/market/economic framework, which is the point. I'm not trying to suggests there's NO DIFFERENCE between any business and any government, I was responding to the comments above essentially mocking the idea that there's any similarity whatsoever and only a fool would think so.

It's a little bit dishonest to insist on the similarities between corporate decisionmaking and democratic decisionmaking

I said "business" and "government", and I stand by that. Generally speaking, they are more similar than dissimilar for all the reasons I mentioned (you're only focused on governance - what about debt, economics, the tax base, revenues, etc, etc - they even market to tourists and immigrants like business attracting customers!).

This does not therefore make all forms of group decisionmaking equivalent.

Never said they were equivalent. I said "Of course government and business are different, but that doesn't mean that there aren't significant similarities"

1. If somebody's answer to "should government be run like a business?" is anything other than "no, that is insane, a business' ideal model is to maximize benefits for a tiny number of owners or shareholders, and a government's ideal model is to maximize benefit for everyone, which is literally the exact opposite, so while it's fine to say governments should pursue efficiency or not be wasteful, business is a ludicrous model, governments should be run like very good governments, and you should feel bad for even asking that question", you can safely ignore anything they have to say about government, civics, economics and politics. Send them to this page and if they call you a "snowflake" or a "Neo-Marxist," tell them I said they owe you a quarter.

This is the footnote I was responding to. I think it's wrong and seems to mistake the purpose of business/government with the methods used to fulfill that purpose. How are the methods employed to "run" a "very good government" different from the ones used to run "a very good business" to very different ends?
posted by Mirax at 5:37 PM on April 24


> How are the methods employed to "run" a "very good government" different from the ones used to run "a very good business" to very different ends?

The methods needed to maximize benefit to a relatively broad base of people differ from the methods needed to maximize benefits to a relatively small group of people. Particularly, if you're interested in maximizing the benefits to a relatively small group of people, it's a rational play to offload negative externalities onto the broader group (because, after all, what are they going to do about it? If they didn't want negative externalities dumped on them, they should have decided to be born inside the charmed circle).

If you're responsible to a broad group, it's much harder to run that game.
posted by Reclusive Novelist Thomas Pynchon at 6:10 PM on April 24 [6 favorites]


I'd wager a sizable percentage of the global south would dispute that (certain) governments don't routinely offload huge, often devastating negative externalities onto groups beyond their jurisdiction who can't offer much meaningful input into the matter.
posted by Freelance Demiurge at 6:26 PM on April 24 [3 favorites]


Right! Just like a private business or sole proprietorship!

and also like a sink: you're managing debt (water in sink), raising revenue (tap), to satisfy the customer (owner of the sink).

It's a frivolous comparison, because you can fit it to literally anything that has a resource going in and a resource going out to achieve some purpose, and the purpose you're trying to achieve is actually extremely important in describing how the system functions.

(I think this proves that the linked page is not an Internet Argument Ender, in any case. There's always someone who disagrees with the premise, and if we try and address that eventually we get to "I don't know how to explain you should care about other people".)
posted by Merus at 6:36 PM on April 24 [5 favorites]


> I'd wager a sizable percentage of the global south would dispute that (certain) governments don't routinely offload huge, often devastating negative externalities onto groups beyond their jurisdiction who can't offer much meaningful input into the matter.

Oh absolutely. Imperialism is a great way for a democratic government to soak up profit while offloading negative externalities.

Back to the article: suburban governments often run versions of this game — get as many profitable people and companies as possible into the suburban city limits, refuse to provide services that might be expensive / chase out people who might be expensive, count on the center city to pick up the slack.
posted by Reclusive Novelist Thomas Pynchon at 6:47 PM on April 24 [2 favorites]


but yes: running a government like a business means aggressively finding opportunities to maximize profit without regard for negative externalities, since (aside from a few radical outliers which operate on terms different from most businesses) that's the mission of a business.

However, the way we've split up responsibility in this country is that opportunities for profit are the responsibility of private concerns, which don't have to care about negative externalities,1 while the task of managing those negative externalities falls to government.2 These are two distinct tasks that require two distinct methodologies.

That said, I broadly agree with you if you're saying that this established separation of tasks — profit-generation for businesses, shit-management for government — is a bad deal. For example, I am very much in favor of municipal governments starting up moderately profitable public utilities (taking over the infrastructure from extant private utilities when possible), starting up moderately profitable municipal banks, and so forth.

One place where municipal governments are leaving insane amounts of money on the table is the housing market; by building new public housing and by expropriating property from landlords and running it as public housing, cities would be able to both respond to the housing crisis and also make a profit.

1: except when onerous job-killing regulations force businesses to take certain negative externalities into account.
2: along with the production of certain positive externalities — a well-paved road network, an educated populace, emergency fire response, and so forth.

posted by Reclusive Novelist Thomas Pynchon at 7:22 PM on April 24 [2 favorites]


FWIW I would argue that services are not the product the government "sells". Services are the overhead. The product sold is coercive force. If government operated "like a business" it would immediately nationalize all property, extract the maximum value from the citizenry, and provide the minimum of services. This picture is complicated a little bit by long term planning considerations, but overall I believe that to be the accurate analogy.

Pynchon: I'm not 100% but I don't think my city's extensive public housing department produces revenue. I believe it's an item on city budget that consumes funding.
posted by firebrick at 8:12 PM on April 24 [2 favorites]


I think this proves that the linked page is not an Internet Argument Ender, in any case.

The argument this page ends is "Kingston has abnormally high property taxes! No, it doesn't! Yes, it does!"

which I'm pretty sure is at least 90% of internet arguing.

/actually a big fan of Kingston - lovely little town, I mean, city.
posted by jb at 5:30 AM on April 25


Land use economist here. This analysis leads with a fundamentally flawed assumption and then compounds it. First error: that population is the key “common sense” metric to use when choosing a group of comparable municipalities. Density matters more. Density determines the length of pipe and roads, etc. to build/maintain/plow/replace relative to the number of houses and people to serve. Density determines how many fire stations (and trucks and firefighters inside them) are required to reach everyone within the target number of minutes, which is six. And the same for police substations. In some countries, you have the subsidizations necessary to bring decent internet to less dense communities (previously it was power, telephone, cable tv) that aren’t as profitable. Don’t even get me started on subsidies for stadiums, which brings me to the compounding factor, which is land use.

Like density, land use mix matters. Municipalities lose money on residential housing, especially those with kids; these folks use the parks, libraries, etc. and generate the most calls to first responders. Their taxes won’t cover their service needs. Vacation homes are ok; they pay taxes but use few services. In contrast, commercial uses typically have fire sprinkler systems, internal security and either generate sales tax too (retail) or bring workers to town who spend nearby (offices) or similarly attract visitors. The more commercial uses relative to residential a community has, the lower the tax burden on residential.

On the other hand are uses that don’t pay property taxes, and they vary. From a municipal revenue perspective, churches, especially the storefront variety consuming what would otherwise be economic-activity generating real estate, suck. Universities, hospitals, big federal and state facilities all generate compensating economic activity. Museums are a mixed bag: destination museums generate visitors, the local historical house not so much although it presumably contributes to character.

Getting back to commercial land uses offsetting taxes that would otherwise be born by residential, density raises its head again. On average, less dense communities support less commercial because drive times are a key factor informing feasibility, even more so now in the age of Amazon.

TL;DR the article ignores fundamentals of fiscal impact analysis.
posted by carmicha at 5:34 AM on April 25 [3 favorites]


carmicha: the population size in these cases are a good proxy for density. Guelph, for example, is.a very similar density to Kingston.
posted by jb at 5:39 AM on April 25 [1 favorite]


To avoid abusing the edit window, the fact that residential property taxes don’t cover costs associated with the occupants (especially if they include schoolkids), is why old people voting against raising property taxes to keep pace with inflation, let alone investing in education or roads or whatever, drives me nuts. We amortize the cost of our municipal services and schools burden over a lifetime. Paying for today’s needs is an obligation, just as those who came before paid so our families could benefit from good parks, etc. when we were young. If you don’t use these services or have kids in public schools, it’s still an obligation as a member of society. Also, claiming immunity from this obligation by virtue of now living in a different town is also a hollow argument. Sure, I feel bad for people who stand up at a city council meeting and announce that they’re in a fixed income and can’t afford higher taxes... but what that means is that their home is no longer a viable financially for them and, though it’s sad, they need to think through alternatives.
posted by carmicha at 5:49 AM on April 25 [1 favorite]


carmicha: the population size in these cases are a good proxy for density. Guelph, for example, is.a very similar density to Kingston.

Well, that makes me feel better! And, to be clear, any effort to get people to understand property taxes better has my full support. The use of the phrase "common sense" really stuck in my craw.
posted by carmicha at 6:08 AM on April 25 [1 favorite]


In Toronto, there are provisions to defer property taxes for people on fixed incomes until the property is sold. So all the claims that "seniors can't afford an increase" are disingenuous.

(or maybe they are from seniors who have very high incomes who thus don't qualify for deferment, but don't wish to pay their fair share).
posted by jb at 8:32 AM on April 25 [1 favorite]


"The product governments "sell" are services, infrastructure, etc. If the customer (taxpayer) doesn't feel like they are getting value for their money (taxes) they are free to leave and patronize another government. If someone in Kingston thinks they're getting ripped off, there is nothing stopping them from taking their tax revenue from Kingston to Windsor."

Sure, maybe in a world where cows are spherical. I think we can safely acknowledge that there are a great many people who are tied to their communities for very compelling reasons. Deciding to move to Windsor from Kingston would absolutely take a wrecking ball to my life as I know it.
posted by Secret Sparrow at 1:01 PM on April 25 [3 favorites]


Lol spherical cows.

What you’re describing is price elasticity. There is a tax rate, or a service level, or some other factor that would make you move to Windsor, but for you, it’s perhaps higher than for other residents, as Windsor for whatever personal reasons is not a “substitute” city. For other resident that calculus is different. Obviously the curve is very different than changing toothpaste, but it’s the same principle nonetheless.

If city managers/politicians aren’t taking these fundamental “business” concepts into account with respect to cost of living and quality of living, if they assume there’s no tax burden, or no degradation of services that will make people leave, thereby reducing the tax base, they are doing a poor job.

If you prefer, let’s replace “run like a business” with “more respect for supply/demand, competitive forces and other market factors, with more understanding of accounting and financing”. Or we can have what we’re basically on the precipice of - endemic municipal bankruptcy, decrepit infrastructure, debt for boondoggles, etc etc etc.
posted by Mirax at 1:52 PM on April 25


My experience is centred on the Greater Toronto Area (GTA) but I haven't observed property taxes playing a role in anyone making a decision to move. It is all about the price of the home and its location for schools/commuting (which is controlled more by the province than anything else).

As far as bringing business concepts into municipal governance I think it is much more basic than that. Certain councillors are elected on platforms of keeping taxes low or reducing taxes while others on making investments in the community. For the most part the low tax councillors win and services slightly degrade over time except for certain signature projects which usually get significant contributions from other levels of government as a form of buying votes. I suppose it is possible that if a city happened to elect enough councillors to make investments and raise taxes for a prolonged period then you could see how it would affect migration patterns, whether that be people leaving to lower-taxes areas or people coming to higher-serviced ones, but it would have to happen first.
posted by any portmanteau in a storm at 8:44 PM on April 25 [1 favorite]


« Older "Look at yourself and a hand and a shelf in the...   |   "then surely the song would be your best friend" Newer »


You are not currently logged in. Log in or create a new account to post comments.