Indiana’s cities rely on property taxes. When the housing bubble burst they had their own little tax debacle over assessments. See more in The Indianapolis Star.

Ohio’s cities rely on income taxes. Unlike property taxes - paid rain or shine, receipts dented only in cases of tax delinquency - when unemployment rises, tax receipts fall. Instantly. No liens; nothing delinquent.

Many Ohio cities seek jobs above all else. There are more than a few that used to rely heavily on an estate tax, but changes to state law have made that avenue less lucrative. But how, exactly, does a government grow new jobs?

That’s a big enough debate on it’s own. My point is this: as badly as I’d like to see great city services remain in place, as much as I’d love our Columbus neighborhoods to thrive, there’s negligible return. There’s no fiscal feedback loop in place. The only feedback from improved, or at least maintained city service levels might be some love from the electorate and maybe fewer complaints directed at city hall.

Folks can vote for or against the tax increase, they can vote with their feet and move off to the suburbs, but as long as they keep coming to work in Columbus it hardly affects the bottom line.

Update on Wednesday, July 1, 2009 at 11:54 AM by Andy Taylor

Some local bloggers met with Mayor Coleman last Thursday to talk about the income tax increase. They’ve generously posted the audio from their meeting.

The disconnection between public treasuries and local domestic needs drawing upon them does not exist within taxpayers’ pockets or bank accounts. The same taxpayers supply money for all layers of government. Rather, the disconnection is purely administrative and governmental. “Dumbed-down taxes,” Dark Age Ahead (p105)

Maybe this title will be a better search term than “Subsidiarity” was. I’m sure plenty of my fellow Columbusites will turn to google to help decide how they should vote for the income tax increase.

On Monday, I didn’t indicate what my vote would be, but I did note that the tax is at least, in Jacobs’ view, responsive to ability to pay and economic growth. The problem is that our income tax is a commuter tax. If you work in Columbus, but live in one of the suburbs, you still pay the two percent tax (or, more likely, you have it withheld like your other payroll taxes).

The problem: there is a land-tax dynamic in the behavior of local governmental spending.

Researchers Ann Bowman and Michael Pagano explore this dynamic in a chapter of Terra Incognita: Vacant Land and Urban Strategies, and even discuss Columbus specifically.

As I look at the literature surrounding the income tax increase, the choice I’m looking at is between a higher tax or a decrease in city services. It’s not so simple. A good portion of those paying Columbus’ income taxes opt out of many of the services Columbus provides by living elsewhere. Bowman and Pagano’s numbers have a 2000 income tax receipt of $318 million. In 1999, the estimate they were provided of non-resident commuters paying Columbus income taxes totaled receipts of $140 million. If you’ll allow me to fudge between years, that’s 44 percent coming off the payroll of non-residents who won’t be voting for (or against) this tax.

It would be different if property taxes mattered much to the city government, as I’ll try and show as I continue this post tomorrow.

Jacobs does not take to the paternalism of top-heavy, federal and provincial governance all that well. Her chapter on “Dumbed-down taxes” is particularly well-barbed, pithy, and direct.

Standardization is the parent of stagnation. “Dumbed-down taxes,” Dark Age Ahead (p119)

Virtually all ideologues, of any variety, are fearful and insecure, which is why they are drawn to ideologies that promise prefabricated answers for all circumstances. “Dumbed-down taxes,” Dark Age Ahead (p115)

We abandon science (previous chapter posted on here and here). Without subsidiarity we lose local feedback.

Central planning, whether by leftists or conservatives, draws too little on local knowledge and creativity, stifles innovations, and is inefficient and costly because it is circuitous. It bypasses intimate and varied knowledge directly fed back into the system. “Dumbed-down taxes,” Dark Age Ahead (p117)

Many of the examples Jacobs employs revolve around Canada - Toronto specifically. But you can see such stifling in other domestic examples, such as New York’s meddling with NYC’s proposed congestion tax.

I got canvassed for Columbus, Ohio’s Issue 1 today. The literature tells me to “Vote For Columbus.” That means voting for a half-percent income tax increase: to 2.5 from 2 percent.

Jane Jacobs kicks off her chapter on “Dumbed-Down Taxes” with a history lesson on taxes - especially as they relate to cities, a topic she knows quite well.

Medieval cities didn’t fair so well in the Dark Ages, but their rise from the low point around 1000 shows the culture’s trajectory back out of Rome’s collapse. Jacobs takes the opportunity to introduce one of the advantages these cities held: Subsidiarity.

Subsidiarity is the principle that government works best—most responsibly and responsively—when it is closest to the people it serves and the needs it addresses. “Dumbed-down taxes,” Dark Age Ahead (p103)

 We’ve got a large federal government. We’ve got “bridges to nowhere.”

But, in Ohio, our cities get to participate in a small exception. Our cities can levy an income tax.

Now, Columbus is no city-state. We’ve got local property taxes to fund our schools and other levies. We’ve got sales taxes to cover the county, transit, and other items. Cities, townships, and others compete with the schools for a small sliver of the property tax pie. The state gets income taxes. The federal government gets a larger portion.

But, at least this income tax is: A) responsive to ability to pay - that is, you make less, you pay less; and B) economic expansion - more jobs equals more revenue.

And, we get to vote on it: progressive and responsive.