Is federalism unfair to urbanites?
Ed Glaeser writes:
Poor people come to cities because urban areas
offer economic opportunity, better social services, and the chance to get by
without an automobile. Yet the sheer numbers of urban poor make it more costly
to provide basic city services, like education and safety, and those costs are
borne by the city’s more prosperous residents. Taking care of America’s poor
should be the responsibility of all Americans. When we ask urban residents to
pick up the tab for educating the urban poor, then we are imposing an unfair
tax on those residents. That tax artificially restricts the growth of our
dynamic cities.
It is fair to say that urban dwellers receive higher positive and negative externalities from their neighbors, relative to suburbanites. I’m not sure why the bundle as a whole is unfair, least of all to the wealthier city residents (or why there is so much talk of unfairness to the wealthy in the first place), or for that matter why it is a significant marginal distortion. The net value of the externalities is surely positive for people who live in cities and pay the higher rents. All taxes involve some distortions but it seems like what is essentially a tax on city land does not involve a higher distortion than the average tax, if anything the contrary. What’s really the case for lower property taxes and higher federal income taxes, combined with a move against federalism?
If there is any unfairness, maybe it is toward the people can’t afford to live in desirable cities but would like to. If we lower the property tax burden in cities, rents will rise and this problem will become worse rather than better. The more general point is that urban land owners, not all residents, benefit disproportionately from good policy changes. Urban improvements have unfair distributional effects by the very nature of city land.
If there is a case for federalizing urban education and welfare, surely it refers to what will help the poor (if indeed that would), not what will help the urban non-poor. And are city residents even a meaningful class of people to which the concept of fairness applies in a significant way? Glaeser is very very smart but frankly I found most of this piece puzzling; perhaps I have misunderstood him.