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Strengthening Home Rule on Revenue Powers

If states won't raise the revenue needed for local needs, the least they can do is let those cities and towns tax themselves.  At least that's the proposal by Massachusetts Governor Deval Patrick, who this week proposed eliminating some of the restrictions that prevent Boston and other towns from raising local revenue through sales taxes, meals taxes or many other fees that comparable cities use.  This proposal joins a slew of other proposals for expanding local revenue options:

  • The Indiana Association of Cities and Towns, along with police, firefighters and business allies, have proposed a Hometown Matters plan to give local governments new revenue options so they can ease the property tax burden locally.
  • In Georgia, a bipartisan proposal backed by a coalition of 15 chambers of commerce would allow two or more adjacent counties to ask voters to raise local sales taxes or create a local gasoline tax to fund multi-jurisdictional transportation improvements.
  • Montana legislators have proposed giving local cities and counties the right to vote on local sales taxes on lodging and meals.

These proposals have all run into stiff political opposition, but states might want to pay attention to a new report released in conjunction with the Massachusetts home rule proposal.  Limiting local revenue options also limits a range of planning tools based on tax incentives, creating, in the words of the report, "a competitive disadvantage at a time when all major cities are looking to deploy as many tools as possible in order to secure their economic future."  

The report links the limited home rule of the City of Boston to its lack of population growth, higher housing costs and underfunded public schools compared to other major cities with much stronger home rule powers-- a drag on economic development that more states should consider when they limit local home rule powers.

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