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November 16, 2025

An Anecdote on Taxation

I enjoy telling this little anecdote about how voters tend to feel about taxes and spending.

From 2004 to 2007, I lived in a suburb near a military base in Ohio. It was a very conservative area, voting for George W. Bush, John McCain and Mitt Romney by double-digit margins. But, twice during my brief time there, we voted on school referendums. The total amount was fairly large, raising my household tax burden by about $80 a month.

The largest of the two referenda asked for money to install artificial turf onto the high school football field, provide heated benches for players and build a second pre-K-1 school. The pre-K-1 school had scaled-down features, catering to the smallest students. Cute and functional.

The school district was not permitted to campaign for the referenda but could share official information. So, my kindergartner brought home financial proformas in her backpack. I was impressed that the artificial turf would pay for itself in maintenance savings within four years. The referendum passed easily.

Around the time we were preparing to vote on the first school referendum, my wife shared a story about a playground experience.

Most new neighborhoods in our town had small playgrounds — developers were required to add them. Ours was modest: five or six pieces of equipment, some benches and picnic tables. My wife was there one afternoon, watching our three kids play and chatting with other adults.

One was a grandmother keeping her grandkids after school. Their conversation turned to the convenience of the playground. This grandmother remarked that she'd voted against the referendum to pay for these new playgrounds and thought she’d made a mistake.

She loved going there with her grandkids and was happy that the community voted to build and maintain these facilities despite her vote. She explained that her kids were already through school and she felt a bit put upon to pay the extra taxes.

That’s not an uncommon position. But, as she thought more about it, she realized she was mistaken. The better facilities attracted her daughter and son-in-law back to town after college. It also made her house value appreciate, giving her more options in retirement.

These sorts of conversations are poor substitutes for hard data on tax rates, local amenities and migration decisions. However, this view is notable because it is precisely what more than a half-century of economic research tells us to be true about the household location decision of families.

Most of county-to-county migration in the U.S. is from people moving from low-tax counties to high-tax counties. I know that isn’t what cable TV tells you, nor does it match the claims of tax-cut advocates, but it is a simple fact, like the time of sunrise this morning or today’s high temperature.

Of course, this doesn’t mean taxes don’t matter. If a family can choose between two otherwise identical neighborhoods, the one with lower taxes will see more in-migration. The problem is, such choices are very rare. For the most part, the higher-tax places have better schools, lower crime rates, better parks and more retail and recreational options.

This isn’t universally true, and it is worth noting that places with high taxes and low-quality public services lose residents — as well they should. Population change is a clear signal about the value of your community. At the same time, higher taxes aren’t a panacea for making a place better any more than low taxes are a tool for attracting residents. Neither of these strategies work by themselves.

There’s always some crank who claims taxes are theft and wishes to defund teachers, police and water districts. And there’s always someone who wants local government throwing money at new housing even when rents are too low to attract builders. Neither cohort enjoys a firm grasp of high school economics.

The challenge is how to judge how well your community is doing, and how you should approach the challenge of finding a tax rate and amenities that will attract residents — or, at least, prevent population decline.

It turns out, there’s an easy rule of thumb. If you are losing people, or your home values are declining, it is pretty likely that you have too few amenities for your current taxes.

In a place like this, the easiest thing to do is ask, “Are my taxes above or below the national average?” If they are above, you could cut taxes to be more in line with your low amenities. You are a place where local government is underperforming.

If your state and local taxes are below the national average, and people are still leaving, you’d better scramble to gather more tax revenue. You are in a low-amenity place that risks permanent decline, and you need tax dollars to fund the improvements.

Every Indiana community has low taxes — overall among the lowest 10%-25% of counties nationwide. Yet, perhaps this year, and certainly next year, most Hoosier counties will see population losses. Affluent places can largely muddle through slow population declines. Poorer places cannot.

There has never been a more critical time for civic leaders, elected or otherwise, to push for improvements in those local characteristics that make people want to build a life there. Be like that grandmother on the playground 20 years ago. Make your community better, and maybe your kids will return.

Note: The views expressed here are solely those of the author, and do not represent those of funders, associations, any entity of Ball State University, or its governing body.

Link to this commentary: https://commentaries.cberdata.org/1341/an-anecdote-on-taxation

Tags: budget and spending, community, democracy, economic development, economy, education, family and households, government, growth, indiana, housing, migration and population change, public services, quality of life and placemaking, schools k-12, state and local government, taxes, value


About the Author

Michael Hicks cberdirector@bsu.edu

Michael J. Hicks, PhD, is the director of the Center for Business and Economic Research and the George and Frances Ball distinguished professor of economics in the Miller College of Business at Ball State University. Note: The views expressed here are solely those of the author, and do not represent those of funders, associations, any entity of Ball State University, or its governing body.

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