Framing Taxes: Making the Reasonable Seem Unreasonable

Framing Taxes: Making the Reasonable Seem Unreasonable

We are within weeks of final public hearings and final actions on municipal budgets across the state.

One of the ways decisions about taxes and fees are reported is to translate the millage rate or fee amount into a percentage change. This is perfectly reasonable; it’s a way of gaining a sense of proportion related to the increase.

But these proportions can be . . . well, out of proportion when isolated from the overall financial picture.

A simple hypothetical makes the point.

Suppose a city generates revenue from three sources in equal shares: roughly one third of all general revenue from each source. Suppose further that these three sources all generate revenue from everyone in the city, and roughly equally (just to take the interest group politics out of the conversation for a moment).

Looking ahead, the city staff and council, with no plans to expand or improve any service the city provides, conclude that they will need 2% more revenue next year than this in anticipation of rising costs (the CPI has been hovering around 1.8% year-over-year for the last few months, excluding energy and food costs, which dropped dramatically but now are rebounding). One option: increase the rate or fee from all three sources by 2%. Another: increase only one rate or fee by 6%.

Both approaches produce the same increase in revenue. Both approaches actually have the exact same effect on the citizenry in my simplified city.

But the latter approach produces a somewhat disturbing headline: City Raises Tax by 6%. The story might include citizens or pundits opining that 6% is three times the CPI, etc., etc.

Nothing in that headline or that story would need to be false in any way for a very misleading impression to be left with the public.

But it gets worse. Suppose my mythical city actually generates 80% of its revenue from just two of the sources, while the third provides only 20%. Suppose that third source is chosen to pick up the cost of inflation for the next year. Covering a 2% increase in overall cost would require a 10% increase in this one fee.

Now we’re into double digits . . . and there’s every likelihood that folks will go nuts.

But it’s the same as a 2% increase across the three fees . . . which would seem perfectly reasonable to the press and the public, in sync with CPI and our own household realities.

Of course, it’s never this simple. Each source of revenue affects different constituencies differently.

But the simple fact is that these often prudent decisions about how to meet rising costs through selective fee and rate increases can and are framed as absurd grabs for money by an irresponsible government. This numbers game is played on social media and in the press. And, absent the larger frame of municipal government revenue, it’s very hard to defend.

But defend these decisions we must. Our complex revenue structure requires thoughtful management. And our complex range of services must be provided effectively as well as efficiently.

It’s a challenge . . . a painful one. We need to push reporters and editors to tell the whole story, so the context of any increase is clear. We need to urge editors to rein in headline writers with a flair for the overly dramatic.

Even though those efforts often will fail, we need to stay the course, make the right call, and invest ourselves in helping our citizens find the right frame for thinking about their cities.