Question

What is meant by erosion of a city's tax base? Why does it follow from exurban migration? What are the results?

Short answer

The erosion of a city's tax base refers to the decline in its taxable income, often resulting from exurban migration—that is, people or businesses moving away from the city. This can lead to reduced city services, higher taxes for remaining residents, and declining economic health in the city.

Step-by-step solution

Understanding Erosion of a City's Tax Base

Erosion of a city's tax base typically refers to the decline in the taxable income or wealth within a city due to shifts in population or economic activity. This can occur due to several reasons, one of which is exurban migration.

Understanding Exurban Migration

Exurban migration involves people moving away from urban areas to rural or less populated regions typically on the outskirts of cities: the exurbs. This migration pattern can significantly influence the city's tax base.

Linking Exurban Migration to Erosion of City's Tax Base

When people or businesses move away from the city to the exurbs, they take their income or economic activity with them. This results in a decline in the city's taxable income, leading to the 'erosion' of its tax base. Since tax revenues are a significant source of funds for many city services, such a decline can impact the availability and quality of these services.

Evaluating the Results of Erosion of City's Tax Base

A weakened tax base can lead to reduced city services, increased taxes for those who remain, or both. In the long-term, this can negatively impact the city's attractiveness and overall economic health, potentially prompting further exurban migration and perpetuating a cycle of decline.