Re-imagining the Fiscal Architecture of Our Cities

For Michael A. Pagano, local municipalities went awry in designing fiscal systems during the 20th century by fabricating what he refers to as “a crazy quilt of local revenue.” He proposes some possibilities for getting cities back on track.

Read Time: 2 minutes

December 6, 2012, 8:00 AM PST

By Erica Gutiérrez


From Boston to Cincinnati to Tulsa, cities depend to largely varying degrees on property taxes, income taxes, and sales taxes as a source of revenue. Historically, however, Pagano points out, “[i]t wasn't always like this." Municipal governments used to rely more heavily on property taxes and on taxing the rich. Since the turn of the 20th century, states went from raising 45 percent of their own-source revenue from the property tax, to only 3 percent in the post-World War II era, despite such taxes remaining "a dominant revenue source for decades to come."

No matter what the tax source, however, the past five years have had a huge impact on municipal revenues. “The Great Recession is just the latest challenge to cities’ ability to raise tax revenues from various sources,” writes Pagano. “Increased unemployment, declining consumer confidence and other economic trends associated with the Great Recession have had a substantial impact on all sources of tax revenue for the nation’s cities.” Yet as cities seek out new ways of raising revenues in the form of user fees, while also looking to cut spending, Pagano asks, “Is the current fiscal architecture of a city a good one?” One major problem he points to is the “free rider” economic structure of many regions in which employment centers fail to capture tax revenues from commuters despite the provision of city services “during their 9-to-5 lives.”

So, what is the solution? Pagano proposes taxation “at the place of employment” as a means of better “[linking] cities to their underlying engines of growth or to income and wealth, similar in design to what the property tax attempted to accomplish two centuries ago.” He pushes the reader to “imagine” how this could change the “decision calculus” by which individuals, households and users of city-government services choose where to work and live, while “paying their fare share.” Pagano concludes, “It could be revolutionary.”

Tuesday, December 4, 2012 in The Atlantic Cities

Chicago Commute

The Right to Mobility

As we consider how to decarbonize transportation, preserving mobility, especially for lower- and middle-income people, must be a priority.

January 26, 2023 - Angie Schmitt

Green bike lane with flexible delineators and textures paint in Hoboken, New Jersey

America’s Best New Bike Lanes

PeopleForBikes highlights some of the most exciting new bike infrastructure projects completed in 2022.

January 31, 2023 - PeopleforBikes

Sharrow bike markings on black asphalt two-lane road with snowy trees

Early Sharrow Booster: ‘I Was Wrong’

The lane marking was meant to raise awareness and instill shared respect among drivers and cyclists. But their inefficiency has led supporters to denounce sharrows, pushing instead for more robust bike infrastructure that truly protects riders.

January 26, 2023 - Streetsblog USA

A tent covered in blue and black tarps sits on a downtown Los Angeles sidewalk with the white ziggurat-topped L.A. City Hall looming in the background

L.A. County Towns Clash Over Homelessness Policies

Local governments often come to different conclusions about how to address homelessness within their respective borders, but varying approaches only exacerbate the problem.

February 3 - Shelterforce Magazine

Rendering of mixed-use development with parks and stormwater retention on former Houston landfill site

A Mixed-Use Vision for Houston Landfill Site

A local nonprofit is urging the city to consider adding mixed-use development to the site, which city officials plan to turn into a stormwater detention facility.

February 3 - Urban Edge

Aerial view of downtown Milwaukee, Wisconsin at sunset

Milwaukee County Makes Substantial Progress on Homelessness

In 2022, the county’s point-in-time count of unhoused people reflected just 18 individuals, the lowest in the country.

February 3 - Urban Milwaukee