ABSTRACT
Local officials must be mindful that raising taxes past a certain point might tempt residents and businesses to other jurisdictions in search of a better deal. Because these considerations are always present, local fiscal policy is determined within a battleground in which cities are always trying to outbid one another, and there will be winners and losers. The contrast with Sunbelt cities is striking. The revenue source that saved the cities from the worst fiscal effects of the urban crisis in the years following World War II came in the form of federal aid in the 1960s and beyond. By 1962, property taxes yielded barely 50 percent of municipal revenues in the 72 largest metropolitan areas. However, by 1989 the city–suburban ratio had reversed; now the average city resident made 84 percent as much. At the same time, in 1989 the poverty rate in central cities was 18 percent, which was more than double the metropolitan average of 8 percent.
