by Gary London
This recession has laid bare some longstanding problems in our private and public sector financial system. If jurisdictions are allowed to broaden their tax revenue base, the effect would be the encouragement of the kinds of higher density, mixed-use development needed in most communities.
Cities and other local jurisdictions have traditionally focused on retail for sales taxes, hotels for transient occupancy taxes, or TOT, and tax increment financing (property taxes) through redevelopment as the major tax sources to pay for their “general fund” operations. It is unusual for these revenue sources to decline, yet each source is dramatically down. Some of this tax revenue will eventually return. Alarmingly, some may not.
I want to focus on the alarms going off.
The “Great Recession” has set in motion two trends that may influence consumer behavior for a long time. Economists refer to these habit breaking events as structural changes. The first and largest trend is consumer spending. In the past three decades, personal consumption expenditures have risen from less than two-thirds of the nation’s gross domestic product (total value of all goods and services produced in the U.S. in one year) to nearly 72 percent. In the same time period, personal savings fell from more than 10 percent of disposable income to about 1 percent. This increased consumption and reduced savings, coupled with an increased willingness to accept higher levels of debt and risk, likely helped fuel the last two asset bubbles: the dot-com stock and housing price bubbles. It’s the bursting of the housing price bubble and decline in perceived wealth that may trigger the second change in trends: households’ inability and/or unwillingness to tap their home equity to supplement their consumption.
Posts
No comments:
Post a Comment