Growth and Development... of Taxes?

The following should put a spring in the step of my friend Lee Yager as he heads for the golf course this morning. His warning in a letter to the editor a couple years ago that the mindless "grow or die" philosophy would turn Madison into a "metropolitan madhouse" still rings in my ears, as much for its hyperbole and alliterative-slogan potential (think of it on a billboard: "Madison: Metropolitan Madhouse!" Now that would be Unexpected™!) as for its reminder that growth isn't always what it's cracked up to be.

Case in point: a real metropolitan madhouse (well, the closest thing we've got), Sioux Falls. Our biggest city's population growth has been the envy and perhaps the bane of many a regional economic development chief. Last year Sioux Falls was among the 50 fastest growing cities in the nation in 2006*. The city has doubled in population since 1970 and currently adds 3000 to 4000 people and a square mile of turf a year.**

Sioux Falls's vigrous growth looks like another feather in the statistical cap of this low-tax economics professor and blogger who finds a slight (-0.23) but statistically significant negative correlation between state population growth and state tax rates -- 1% higher state tax burden correlates with 0.23% less population growth. His commenters question the validity of the results, but the proposition is interesting....

Now my friend Lee loves low taxes, but he might not be so fond of all the people those low tax rates appear to attract. This brief KELO blurb makes me wonder if Lee will end up getting the worst of both worlds as population growth causes higher taxes. You'd think that higher population means more people to share the costs of public services and thus a little lower tax burden for each individual. But more people also means more demand for services. Dakota County, MN (that's the south side of the Cities), sees its population growth bringing a 5% increase in traffic each year, leading to a projected quadrupling of road congestion by 2025 and the need for more tax revenue to pay for more roads. The Carrying Capacity Network argues that population growth just can't pay for itself as we try to keep up with the new schools, hospitals, and prisons all those new people need.

Now it's not that Lee and I don't like people (well, maybe I shouldn't speak for Lee -- stop out to the gravel pit this spring and ask him yourself). Having more neighbors can bring a number of advantages (more folks to ask for a cup of flour, more folks to support businesses and local arts, etc.) But as Sioux Falls grows, and as the LAIC's Forward Madison project pursues its goal of adding 400 new residents to Madison over the next few years, let's not be surprised if all that population growth still doesn't give us the wiggle room to lower our taxes.

*Ben Dunsmoor, "SF Makes 'Fastest-Growing Cities' List," KELOLand.com, 2007.04.05.
**Matt Belanger, "How Big Can the 'Big City' Get?" KELOLand.com, 2007.04.06.