Tax Base-Sharing: A Fiscal Aid Towards More Rational Land Use Planning

Abstract

Abstract Tax base-sharing (as distinct from revenue-sharing) is a scheme designed to strengthen the fiscal capacity of local governments to respond to local public service demands including those for more rational land development, open space, and environmental preservation. By incorporating in the local property tax formula links with the pace and pattern of land development in neighboring jurisdictions, base-sharing shifts incentives from interjurisdictional competition to cooperation. Base-sharing legislation has been adopted in the Minneapolis metropolitan region as a way to rationalize urban development patterns, and by the State of New Jersey as part of its Meadowlands Reclamation program as a way of compensating localities whose land is withdrawn from industrial development for environmental purposes. A statewide base-sharing proposal currently pending in the Maryland State Assembly is used here to illustrate the major features of base-sharing plans and to explore effects on location decisions, the local fiscal cycle, and land use planning decisions.