The voices of Tax Policy Center's researchers and staff
While advancing racial equity has been a top priority for the Biden Administration, mayors were attempting to tackle unequal access to wealth and opportunity even before the federal government got involved. Many had already drafted “equity plans” in addition to initiating policy or program statements, charter amendments, and ordinances or city council votes.
In a new report, we examined the implementation of equity plans in 28 cities participating in the City Budgeting for Equity & Recovery program launched by Bloomberg Philanthropies. We also looked at 50 other large (populations above 100,000 people) cities across the country.
The result: Cities have made numerous explicit commitments to advancing equity. However, they are a lot farther along thinking about centering equity strategies in spending than revenues. Although many are working to reduce or eliminate fines and fees that disproportionately harm Black and Latino households, this effort has largely not yet extended to most other revenue sources.
However, our review also uncovered promising approaches. Cities engaging in equity-based revenue reforms are at varying stages in this process. Some are integrating equity into the evaluation of discrete revenue sources or dedicated funds while others are considering equity for their entire general funds.
There are trade-offs associated with different approaches and it is crucial for city leaders to measure and track whether equity-informed revenue processes actually produce stronger equity outcomes. One promising example: The District of Columbia’s newly instituted Council Office of Racial Equity (CORE) and its racial equity impact assessments (REIAs).
CORE defines the assessments as “careful and organized examinations of how different racial and ethnic groups will likely be affected by a proposed bill or resolution.” And the District requires REIAs when a committee of the city council reviews a bill prior to a vote. Think of it as a Fiscal Impact Statement but for equity.
For example, when the District considered a rebate for property taxes paid by DC Central Kitchen, a nonprofit charitable organization, the REIA addressed the overall value of economic development subsidies, analyzed city demographic data on food insecurity and unemployment by race, and assessed who could benefit from the organization receiving the tax rebate. CORE concluded that the tax rebate has the “potential to advance racial equity,” and the DC Council approved the rebate.
Beyond taxes, some cities are applying equity principles to nonmonetary and in-kind resources such as developer exactions, or non-monetary compensation tied to land use agreements, and land transfers. The city of Eureka, California, for example, transferred city-owned parcels of land to the Wiyot Native American tribe to help compensate for past land seizures by the US government.
Others are considering challenges in tax administration, such as outdated property tax assessments or appeals that are more likely to succeed in affluent communities.
More broadly, we found there is room to extend traditional principles of sound tax policy to address issues related to equity and inclusion. For example, policymakers considering horizontal equity (“Does the tax provide fair treatment of similarly situated individuals and businesses?”) may also wish to ask how the tax impacts neighborhoods that have been marginalized in access to jobs or capital.
Addressing these issues is complicated and often will require local governments to resolve conflicts among key principles. Standard evaluations based on consistent data will help cities evaluate inequities across revenue sources.
But there is no one-size-fits-all approach. Cities inevitably will reflect differences in institutional and political characteristics, such as fiscal autonomy, home rule powers, and – of course – political will. Another key issue: How residents are engaged in these decisions. For example, extensive 5-year outreach was needed to pass a voter-approved tax increase to fund Indianapolis’ public transit system in 2016.
Federal and state policy makers also can highlight equity and require transparency in the distribution of funds. The Biden Administration’s Treasury Department now requires every state and local government getting fiscal relief under the American Rescue Plan to file detailed reports showing how their planned and actual uses of funds will “support a strong and equitable recovery.” The recently-enacted Infrastructure Investment and Jobs Act also asks funding recipients to extend considerations of equity into revenue streams that fund infrastructure efforts. These will provide additional important data on how cities are responding.
Overall, our research suggests that cities and their residents can benefit from incorporating equity into their reviews of revenue systems. And, just as New York City’s budget was the basis for the first US presidential budget, the federal government and states may also stand to gain from this period of local experimentation.
Posts and comments are solely the opinion of the author and not that of the Tax Policy Center, Urban Institute, or Brookings Institution.
Lisa Baumann/AP Photo