Part 2: Rethinking Local Government Revenue Systems

Part 1 of the Rethinking Revenue initiative was about defining the problem that local governments’ revenue systems create for local governments and their taxpayers. In short, local government revenues have not remained aligned with economic realities. This contributes to distortions in the economy and unfairness in how taxpayers are treated. An antiquated revenue system impacts local governments’ ability to provide services.

There are many options for how local government revenues could be changed. To help guide us toward the best options, Part 2 is dedicated to developing a set of evaluation criteria. These criteria will help us differentiate between how local governments could raise revenue and how they should raise revenue. How local governments should raise revenue is not just or even a technical question of economics or finance. As we will see, questions of fairness and accountability of local government to the public are critical. The criteria will be used by the Rethinking Revenue initiative to evaluate suggestions we have for state and local governments as our initiative moves forward. More importantly, we hope that the criteria can encourage a reexamination of local revenue by state and local government policymakers and help guide conversations about the future of local government revenue.

• Publication date: January 2022