Exploring Benefit-Based Finance for Local Government Services

Must User Charges Harm the Disadvantaged?

by Kevin F. McCarthy, Kevin Neels, C. Peter Rydell, James P. Stucker, Anthony H. Pascal


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Beneficiary charges — fees, permits, special assessments — constitute the fastest source of local government revenue. They promote efficiency in consumption and production and allocate fiscal burdens directly to users. Local jurisdictions surveyed report a wide variety of highly innovative practices. Vertical equity can be preserved through ad hoc price adjustments for target groups or neighborhoods or through comprehensive voucher plans. Considerable revenue might be raised from charges on such exemplary services as civil courts, paramedics, and street lighting, while the disadvantaged are still protected against disproportionate new fiscal burdens. Considerable analytic and political groundwork must precede the implementation of benefit-based finance systems.

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