Summary
The focus of this article is to examine the relationship between local economic growth and development and local government revenue capacity. A model is established to determine the relationship between the number of agricultural, manufacturing, service, and retail establishments per capita and employees per capita on real local government property tax capacity per capita. High property tax levies are highly negatively correlated with tax capacity. Population density, the general price level, and the presence of local retail sales taxes also play a role in determining tax capacity. New business creation in the service industry does appear to have a positive impact on local government tax capacity, while increases in agricultural, manufacturing, and retail activity do not. Although increasing concentration in the number of service establishments has a positive impact on tax capacity, increasing concentration in the number of service workers alone does not seem to lead to increases in tax capacity.
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Extract
The Fiscal Impact of Economic Growth and Development On Local Government Revenue Capacity
INTRODUCTION
The fiscal impact of growth and development on communities has become a major issue because many areas across the U.S. experienced substantial growth. Many growing communities have been faced with the prospect of financing growth and development related infrastructure such as off-site streets and waste-water treatment facilities. Concern about the fiscal effect of growth is best evidenced by the rapidly increasing trend to adopt impact fees. One lingering question is: Does economic growth and development necessarily increase overall local government revenue capacity? The focus of this paper is to examine the relationship between local economic growth and development and local government revenue capacity. Specifically, a model is established to determine the relationship between the number and proportion of agricultural, manufacturing, service, ...See the full content of this document
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