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Chapter 23: Problem 8

What is meant by erosion of a city's tax base? Why does it follow from exurban migration? What are the results?

Short Answer

Expert verified
Erosion of a city's tax base refers to the decrease in the total value of money the city can gain in taxes due to the reduction in its total taxable assets. Exurban migration can lead to such erosion because people and businesses moving out of the city take their taxable assets with them. The results of this erosion are financial challenges for the city, including reduced public services and potentially higher taxes, which can further drive exurban migration.

Step by step solution

01

Define Erosion of a City's Tax Base

The tax base of a city refers to the total amount of value of its taxable assets, including properties, incomes, and other valuable goods and services. The 'erosion' of a city's tax base refers to the reduction in this total value, which decreases the amount of money the city can gain in taxes.
02

Explain Exurban Migration

Exurban migration refers to the movement of people out of urban areas and into outlying, often suburban, areas. This could be driven by various factors including cost of living, seeking more space, or lifestyle preferences.
03

Connet Exurban Migration and Erosion of Tax Base

When there is a significant exurban migration, the city's tax base can erode because people and businesses moving out of the city are taking their taxable assets with them. This reduces the overall value of assets within the city that can be taxed, hence eroding the city's tax base.
04

Explain the Consequences of Erosion of a City's Tax Base

As the tax base erodes, the city may confront financial challenges as their revenue from taxes decreases. This could result in cuts to public services like education, public safety and infrastructure maintenance. It could also lead to rising taxes for those remaining in the city, which could further drive exurban migration, creating a potentially detrimental cycle.

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