Intrametropolitan Area Revenue Raising Disparities and Equities, Working Paper 019 Open Access

The purpose of this study is to assess the extent of variations in the revenue capacity and effort of local governments in six metropolitan areas – Baltimore, Las Vegas, Miami, Milwaukee, Richmond, and San Francisco. Our approach is to use the Representative Revenue System developed by the U.S. Advisory Commission on Intergovernmental Relations to calculate revenue capacity and effort measures for local governments within each metropolitan area. Revenue capacity is the amount of revenue a local government can potentially raise from its own sources if it applies average tax rates to each tax base, while revenue effort is what it actually does raise dependent upon revenue bases and rates. Measures of revenue raising capacity and revenue raising effort, including indices, rankings, and disparity scores, are presented. General policy recommendations are offered based upon our analysis of revenue raising disparities relative to jurisdictional dependence on particular revenue sources, to sensitivity tests, and to city-suburban disparities or equities. The research results reveal that there are substantial differences in revenue raising capacity and effort between jurisdictions within metropolitan areas – not only among core and suburban jurisdictions, but also among suburban jurisdictions. Additionally, per capita income is not a satisfactory substitute for per capita hypothetical capacity when determining revenue raising disparity through use of coefficients of variation. We achieved high correlation coefficients between the two alternative measures in only three of our six case studies and only when applied to the crudest of our case study analyses, that which included only counties, county equivalents, and municipalities over 25,000.

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