Show-Me Institute Question of the Week

January 25, 2010

Show-Me Institute Question of the Week

Readers, commenters, Missourians, lend me your keyboards.

What do you think is the most heavily subsidized lifestyle: urban, suburban, exurban, rural, or small town? Think of subsidies of every level and in every way — so, basically, when you choose to live in one of these five locations types, which is the one the depends most on other people giving you money through involuntary government subsidies?

Let’s briefly define our terms: By “urban,” I mean within major cities; “suburban” should be the mainline suburbs of those cities; “exurban” should be the extended suburbs that came into being about 20 years ago; by “rural,” I mean farming, ranching, etc.; and by “small towns” I mean towns within rural areas, including small cities like Joplin or Cape Girardeau.

Here are my votes, from most heavily subsidized to least subsidized: urban, rural, exurban, suburban, small towns.

I think there would be a big gap between numbers 2 and 3, and a pretty good space between 3 and 4. I’ll try to find some data to get some answers after I have enough responses. Go!

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12 Comments »

David, would love to see your answer. But far are you going to go? Are you going to count farmers that are subsidized??, how about big shopping centers TIF’s?? Builders TIF’s and incentives?? Roads? Hotels? How about companies that get tax breaks? If you count it all, here’s my guess. Exurban, Small towns, rural, suburban, urban. Once your finished would love to have you on the air to talk about the results. McGraw

Comment by McGraw Milhaven — January 25, 2010 @ 6:36 p.m.
McGraw,
Thanks for the comment. I didn’t list any specific types of subsidies because I want people to count absolutely everything. Everything you listed above counts, and they are all great examples. I don’t expect to get THE SINGLE ANSWER. I do hope to get a number of thoughtful responses, and I am confident I can find some solid economic papers with some good analysis. However, unless those papers focus directly on Missouri (and I doubt I find one that does) I won’t take any of them as the final word. Every state is different in how they break these things down. For example, the exurbs in an area like Chicago that makes heavy use of toll roads are going to be less subsidized than in St. Louis or Kansas City, at least in that one, major area. But I’ll gather everything up and I would love to talk about it on The Big 550!

Comment by David Stokes — January 25, 2010 @ 9:49 p.m.
If you include the heavy farm subsidies in many US areas I think that swings the balance greatly – take Nebraska and Iowa as examples, which also have smaller urban populations. Also, many of subsidies in place don’t benefit all the residents – for instance, TIFs to build hotels in the center of a city generally don’t impact the urban resident, who is unlikely to stay in one (save for the odd wedding reception) but do support those non-urban residents. I would guess rural, small town, exurban, suburban and urban.

Comment by Mike — January 26, 2010 @ 5:55 a.m.
Does the location of a military base count as a subsidy? If 50% of a St. Louis resident’s fellow residents receive income-based benefits does that count? Obviously, Washington DC is a mutlibillion dollar ecomony that would not exist but for government subsidies. Still on a per capita basis you have to say rural is going to be #1. There are statistics on incoming and outgoing federal tax dollars and the top states with net inflows are all predominately rural.

Comment by Tom — January 26, 2010 @ 8:51 a.m.
Rural, exurban, small town, urban, suburban

2 and 3 are about a tie. The suburbs of STL and KC pay so many more taxes than they get out that it is not even close.

That takes into account that Clayton/Florissant are suburbs. In most places they would be considered urban, but in St. Louis, they are not.

I am taking into account taxes paid by those areas vs. services received. STL and KC are the economic engine putting money into Jeff City and they don’t get that nearly all of that money back. It takes a lot of infrastructure to maintain a lot of square miles, but the rural people choose to live there and big city dwellers let them off the hook by maintaining their lifestyle, a form of government sponsored social engineering, like a lot of tax policy.

Comment by Papillon — January 26, 2010 @ 8:59 a.m.
Let’s leave out the clearest of public goods from the subsidy debate: police protection, fire protection, national defense, local road networks, and public education (the latter can obviously be done privately but all five areas get it in about even proportion, so we’ll discount it.) Other than that, a subsidy is just getting a private benefit from public dollars for something that is not a pure public good. Tariffs, TIFs, welfare payments of all types, farm payments, tax credits, highway dollars beyond your share of the gas tax, public transit costs above the fare; these are all subsidies.

Comment by David Stokes — January 26, 2010 @ 11:41 a.m.
I anticipate that the answer depends on which lifestyle includes a higher percentage of low-income populations, which is probably the urban lifestyle. People with lower incomes consume on heavily-subsidized products and services such as: welfare, food stamps, child care assistance, public transportation, Medicaid, etc. Also, senior citizens fall under the low-income category, and they consume many other entitlement programs like social security and Medicare. Plus, the government receives much less revenue from low-income populations. This demographic pays less in personal income taxes, property taxes, and sales and use taxes.

Comment by Christine Harbin — January 26, 2010 @ 12:44 p.m.
Urban, rural, small towns, exurban, suburban.

I think the ranking of the first two depends most on whether farm subsidies or government entitlements win out. I would guess that suburban regions benefit less from both of these, and also probably don’t use public transportation or other public services as much, simply because they are not often available. The suburbs seem to be a large source of the revenue that goes to the low-income populations in urban and rural areas.

Comment by Charis Fischer — January 26, 2010 @ 1:53 p.m.
Note to Dave Stokes–most rural fire departments are volunteer only. Most urban/suburban/exurban/small town are paid.

Comment by Papillon — January 26, 2010 @ 3:24 p.m.
1. Urban, 2. rural, 3. small town, 4. exurban, 4. suburban.

Urban has lots of visible subsidies– both direct assistance as well as public transit. Rural and small town have lots of farm subsidies and land tax breaks. Exurban and suburban are harder to parse, because I’m sure it depends on the area. Suburbs may gain more in transit, but exurban tend to be poorer than suburban, so they may be more like small towns in public assistance. I think it would fluctuate, area to area. It probably even fluctuates state to state, especially considering agricultural states vs. manufacturing states.

Comment by Caitlin Hartsell — January 27, 2010 @ 9:23 a.m.
First, how do we rank subsidization? Do we consider the dollar amount of subsidy received, or government assistance as a percentage of an individual’s consumption?

For example, someone living solely on welfare may be using government assistance to cover 100 percent of his costs, but that amount is dwarfed by government tax incentives, industry subsidies, and tariffs — all done under the guise of “encouraging” a certain behavior, but which generally help the politically connected (or “American” industries) at the expense of all. Furthermore, consider the unfortunate fact that a good deal of government contracts are not awarded to the best, but to the best connected.

Second, why categorize government dependence based on geographic location? I’m not convinced that the urban/rural lifestyles receive much different levels of subsidy. I think subsidization depends much more on political connections, and what industry a person works in.

If you do want to look at government assistance by geographic location, I think that our new web tool that tracks and maps state tax credits is a good place to start. (http://www.showmeliving.org/taxcredits)

Comment by Audrey — January 27, 2010 @ 10:25 a.m.
We are starting to gather together some data, not that we think we’ll get anywhere near enough to draw proof, just some better insights and ideas. Right now the conventional wisdom among SMI people, at least those who participated in our brief discussion of this topic earlier today, was: rural, urban, then about a tie between exurban and small town, with suburban being last, or the least subsidized lifestyle. We are still gathering more info together, especially on TIF and tax abatements. Really though, it is hard to deny that rural areas are a lifestyle heavily subsidized by other taxpayers.

Comment by David Stokes — February 2, 2010 @ 5:47 p.m.

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David, would love to see your answer. But far are you going to go? Are you going to count farmers that are subsidized??, how about big shopping centers TIF’s?? Builders TIF’s and incentives?? Roads? Hotels? How about companies that get tax breaks? If you count it all, here’s my guess. Exurban, Small towns, rural, suburban, urban. Once your finished would love to have you on the air to talk about the results. McGraw

Comment by McGraw Milhaven — January 25, 2010 @ 6:36 p.m.

McGraw,
Thanks for the comment. I didn’t list any specific types of subsidies because I want people to count absolutely everything. Everything you listed above counts, and they are all great examples. I don’t expect to get THE SINGLE ANSWER. I do hope to get a number of thoughtful responses, and I am confident I can find some solid economic papers with some good analysis. However, unless those papers focus directly on Missouri (and I doubt I find one that does) I won’t take any of them as the final word. Every state is different in how they break these things down. For example, the exurbs in an area like Chicago that makes heavy use of toll roads are going to be less subsidized than in St. Louis or Kansas City, at least in that one, major area. But I’ll gather everything up and I would love to talk about it on The Big 550!

Comment by David Stokes — January 25, 2010 @ 9:49 p.m.

If you include the heavy farm subsidies in many US areas I think that swings the balance greatly – take Nebraska and Iowa as examples, which also have smaller urban populations. Also, many of subsidies in place don’t benefit all the residents – for instance, TIFs to build hotels in the center of a city generally don’t impact the urban resident, who is unlikely to stay in one (save for the odd wedding reception) but do support those non-urban residents. I would guess rural, small town, exurban, suburban and urban.

Comment by Mike — January 26, 2010 @ 5:55 a.m.

Does the location of a military base count as a subsidy? If 50% of a St. Louis resident’s fellow residents receive income-based benefits does that count? Obviously, Washington DC is a mutlibillion dollar ecomony that would not exist but for government subsidies. Still on a per capita basis you have to say rural is going to be #1. There are statistics on incoming and outgoing federal tax dollars and the top states with net inflows are all predominately rural.

Comment by Tom — January 26, 2010 @ 8:51 a.m.

Rural, exurban, small town, urban, suburban

2 and 3 are about a tie. The suburbs of STL and KC pay so many more taxes than they get out that it is not even close.

That takes into account that Clayton/Florissant are suburbs. In most places they would be considered urban, but in St. Louis, they are not.

I am taking into account taxes paid by those areas vs. services received. STL and KC are the economic engine putting money into Jeff City and they don’t get that nearly all of that money back. It takes a lot of infrastructure to maintain a lot of square miles, but the rural people choose to live there and big city dwellers let them off the hook by maintaining their lifestyle, a form of government sponsored social engineering, like a lot of tax policy.

Comment by Papillon — January 26, 2010 @ 8:59 a.m.

Let’s leave out the clearest of public goods from the subsidy debate: police protection, fire protection, national defense, local road networks, and public education (the latter can obviously be done privately but all five areas get it in about even proportion, so we’ll discount it.) Other than that, a subsidy is just getting a private benefit from public dollars for something that is not a pure public good. Tariffs, TIFs, welfare payments of all types, farm payments, tax credits, highway dollars beyond your share of the gas tax, public transit costs above the fare; these are all subsidies.

Comment by David Stokes — January 26, 2010 @ 11:41 a.m.

I anticipate that the answer depends on which lifestyle includes a higher percentage of low-income populations, which is probably the urban lifestyle. People with lower incomes consume on heavily-subsidized products and services such as: welfare, food stamps, child care assistance, public transportation, Medicaid, etc. Also, senior citizens fall under the low-income category, and they consume many other entitlement programs like social security and Medicare. Plus, the government receives much less revenue from low-income populations. This demographic pays less in personal income taxes, property taxes, and sales and use taxes.

Comment by Christine Harbin — January 26, 2010 @ 12:44 p.m.

Urban, rural, small towns, exurban, suburban.

I think the ranking of the first two depends most on whether farm subsidies or government entitlements win out. I would guess that suburban regions benefit less from both of these, and also probably don’t use public transportation or other public services as much, simply because they are not often available. The suburbs seem to be a large source of the revenue that goes to the low-income populations in urban and rural areas.

Comment by Charis Fischer — January 26, 2010 @ 1:53 p.m.

Note to Dave Stokes–most rural fire departments are volunteer only. Most urban/suburban/exurban/small town are paid.

Comment by Papillon — January 26, 2010 @ 3:24 p.m.

1. Urban, 2. rural, 3. small town, 4. exurban, 4. suburban.

Urban has lots of visible subsidies– both direct assistance as well as public transit. Rural and small town have lots of farm subsidies and land tax breaks. Exurban and suburban are harder to parse, because I’m sure it depends on the area. Suburbs may gain more in transit, but exurban tend to be poorer than suburban, so they may be more like small towns in public assistance. I think it would fluctuate, area to area. It probably even fluctuates state to state, especially considering agricultural states vs. manufacturing states.

Comment by Caitlin Hartsell — January 27, 2010 @ 9:23 a.m.

First, how do we rank subsidization? Do we consider the dollar amount of subsidy received, or government assistance as a percentage of an individual’s consumption?

For example, someone living solely on welfare may be using government assistance to cover 100 percent of his costs, but that amount is dwarfed by government tax incentives, industry subsidies, and tariffs — all done under the guise of “encouraging” a certain behavior, but which generally help the politically connected (or “American” industries) at the expense of all. Furthermore, consider the unfortunate fact that a good deal of government contracts are not awarded to the best, but to the best connected.

Second, why categorize government dependence based on geographic location? I’m not convinced that the urban/rural lifestyles receive much different levels of subsidy. I think subsidization depends much more on political connections, and what industry a person works in.

If you do want to look at government assistance by geographic location, I think that our new web tool that tracks and maps state tax credits is a good place to start. (http://www.showmeliving.org/taxcredits)

Comment by Audrey — January 27, 2010 @ 10:25 a.m.

We are starting to gather together some data, not that we think we’ll get anywhere near enough to draw proof, just some better insights and ideas. Right now the conventional wisdom among SMI people, at least those who participated in our brief discussion of this topic earlier today, was: rural, urban, then about a tie between exurban and small town, with suburban being last, or the least subsidized lifestyle. We are still gathering more info together, especially on TIF and tax abatements. Really though, it is hard to deny that rural areas are a lifestyle heavily subsidized by other taxpayers.

Comment by David Stokes — February 2, 2010 @ 5:47 p.m.

January 25, 2010