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Revenue Enhancements Anyone?

By Dr. Sheila Seuss Kennedy

Public finance these days reminds me of those fellows we used to encounter at the county fairs—the ones who twisted balloons into fantastic shapes, making horses or dogs or other figures from oblong balloons they blew up. Push the balloon here and watch a shape emerge there. I was always on edge, waiting for the balloon to pop after a particularly vigorous twist.

Taxes LogoIn these anti-tax times, as citizens demand services they are unwilling to pay for, public administrators are adopting the tactics of the balloon manipulators of old. Unfortunately, what is “popping” is our understanding of citizenship and collective responsibility.

A couple of days ago, I was copied on an email sent by a former partner of my husband, a retired architect, to his City-County Council representative. It began:

Today we were the recipients of an unannounced revenue enhancement effort “inspection” by a member of the Indianapolis Fire Department, acting under authority of General Ordinance #46, supposedly under the guise of State law.

The message went on to describe a fire department program pursuant to which individual tenants of commercial buildings were notified of an obligation to “self-inspect” their leased premises, report the results, and pay a fee of $25 each for that dubious privilege. Those failing to respond were assessed a fine of $60.

According to my husband’s ex-partner, the owners of the building were not notified, despite the fact that they would seem to be the parties legally and contractually responsible for maintaining the property’s fire safety standards. And as the writer dryly noted, tenant “self-inspections” by tenants unfamiliar with fire safety protocols are highly unlikely to generate confidence-producing results.

What particularly irked my correspondent–a registered architect who has to comply daily with fire safety regulations–was the fact that the building in which he has his offices is fully sprinkled, has a supervised alarm system, and is regularly inspected by the State Fire Marshall. Documentation of these measures is on file with the department demanding the tenant evaluations.

The purpose of these laughable “self-inspections” is rather obvious, and it isn’t fire safety. The purpose, as the writer asserted, is “revenue enhancement.”

Like many other municipalities, our city’s taxing authority has been dramatically (and unwisely) constrained. The administration is under considerable pressure to continue essential services and to continue to support a variety of sports venues and other urban amenities that have come to consider public subsidies their due. There simply is not enough money to do everything, so—among other tactics popular with squeezed-for-cash administrators, like selling off city assets—it is trying to compensate by raising “fees.”

Public finance texts tell us that there is a difference between a tax and a fee. The former is levied on the population at large in order to provide services that benefit the entire citizenry; the latter–at least in theory–are levied on the people directly benefitting from the service. (Building permit fees, for example, are usually earmarked for inspections of the property being constructed.)

Fire safety is a good example of the elasticity of this theory. Many years ago–in colonial times, actually–fire protection was a consumer good. Fire departments (privately owned) would respond to fires at the homes of those who could afford the “insurance” they sold. That didn’t work very well, as one might imagine, and lawmakers soon recognized the benefits of providing “socialized” fire protection.

Thanks to America’s current hysteria over the very idea of taxation, of being expected to pay for the services we receive, we seem to be moving back to the bad old days. Affluent neighborhoods are hiring their own “security” in the absence of adequate police protection. And now, in my city at least, we’re evidently going to use the ruse of a “safety program” to charge commercial occupants for a portion of their fire protection.

This isn’t progress, folks. There is a reason certain services have been considered public goods, and it isn’t simply that collective provision of those services is often more cost-effective.

It’s because we believe that there is such a thing as a public, and that public isn’t simply a collection of consumers. They’re called “citizens.”

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One Response to Revenue Enhancements Anyone?

  1. CP Reply

    September 4, 2013 at 2:26 pm

    Dr. Kennedy,

    While I conceptually agree with your position regarding public goods, I am not necessarily in agreement with you that raising revenues through increased taxation is a desirable solution to the issue. Reduction of the costs of government is another approach to resolving the issue, but it is rarely seriously considered due to the legal, political and regulatory ramifications that accompany those types of undertakings.

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