Value Capture as a Policy Tool in Transportation Economics: An Exploration in Public Finance in the Tradition of Henry George

American Journal of Economics and Sociology, The,  Jan, 2001  by H. William Batt

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Policy makers have two modes of leverage by which to implement public will: 1) so-called "command and control" approaches that are typically enforced by what state and federal constitutions group under "police powers" and 2) fiscal approaches that typically involve a variety of taxes, fees, fines, and other charges that derive constitutionally from either "police powers" or "tax powers." When governments administer either of these powers they are legitimate and authoritative. Fiscal measures available to governments can come from either ground and differ from charges that the private sector usually imposes, which are usually responsive to market forces. Prices which are established by government, however, are not responsive to market forces, nor are they intended to be. Rather they are set in order to accomplish certain public policy goals. [34] They can be no less efficient, however, when responsibly instituted.

Governments face the challenge of knowing which of the tools at their disposal--"command and control" approaches versus "pricing" approaches--will satisfactorily serve effective and efficient completion of public policies. Only in recent years, however, has there been a renewed interest in fiscal levers to achieve the goals which policy makers seek. There is particular interest among students of welfare economics in incorporating costs earlier regarded as externalities. Moreover, use of pricing approaches to recover costs of government services which have a high level of private good about them can bring about more attractive and achievable goals than can reliance upon conventional police power approaches. User fees, environmental fees, and other such fiscal tools have become more fascinating--at least to students of public policy--than conventional taxes.

Because public fiscal policy today involves much more than simply collecting revenue to support the purposes of government, it is important to evaluate various alternatives in the light of the principles of sound tax theory that were enumerated early on. At times it is important that a revenue source be totally neutral-that is, it should be designed to distort the economic behavior of parties as little as possible. In other cases, since it is the behavior itself that has a social cost to the larger society, as externalities, it is important that government impose a charge on such behavior that will recover its costs and/or correct the behavior. Transportation policy has evolved in ways that distorts our economic choices in a highly destructive and costly manner. So have the methods that we have chosen to pay for such services. Value capture is an approach consistent with sound economic and tax principles, provides a means by which the ill effects of past decisions can begin to be corrected, and uses relative ly painless methods to support the next generation of transportation services.

(*.) H. William Batt, Ph.D., is the Executive Director of The Central Research Group, Inc., a non-profit grant-funded research organization specializing in public budgeting and finance in accord with sustainable development principles (Central Research Group, Inc. P.O. Box 4112, Patroon Station, Albany, New York 12204-0112). He is also a consultant to governments on property taxes, transportation finance, and land use. The GIS analysis was provided by Kathy Fisher of Applied GIS, Inc., in Schenectady, New York. The principle investigator wishes to express his appreciation also to officials of the New York State Transportation Department, especially Mr. Frank Mengel of the Office of Real Estate, and Mr. Pete Kelly of the Region One Design and Construction Unit. This paper was prepared with support from the Robert Schalkenbach Foundation, committed to disseminating the virtues of land-value taxation in all its forms.