User Fees' Progressive Promise

• In Event: In Honor of Ronald C. Fisher and His Landmark Text on State and Local Public Finance: Incidence and equity considerations

Abstract

In a climate of tax aversion and chronic revenue shortfalls, cities and states increasingly turn to user fees as a second-best solution to maintain essential services. These fees are often critiqued for their regressivity and for limiting access to vital services. This Article argues that these critiques are too simplistic: they both understate and overstate fees’ harms.

To correctly capture fees’ distributional impact, analyses must: 1) compare fees to the most likely alternative—which, in many cases, is fiscal austerity—and 2) consider the likelihood that low-income people will pay the fee. On the first point, charging a fee to preserve a public service may be less harmful to low-income households than eliminating the service entirely. On the second, the growing prevalence of fee relief programs renders fees more progressive than the next most likely alternative of fiscal austerity.

Original survey data support this theoretical framework, showing wide variation in how user fees are imposed or waived across fees and jurisdictions. In the absence of household-level data on fee payment, the Article looks to fee relief policies for a subset of fees in cities across the US. The findings reveal a nascent yet promising trend: the incorporation of progressive features within fee regimes. But these relief programs are fragile—vulnerable to legal challenges and undercut by administrative design flaws. This Article offers a policy playbook to safeguard and strengthen them, urging lawmakers to recognize that if user fees are likely to persist, their progressive potential must be acknowledged and cultivated.

Author

• Ariel Jurow Kleiman, ajurowkleiman@law.usc.edu