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Here's How Tax Policy Could Downsize the Suburbs

David Callahan

The best policy measures are those that solve two or more problems at once. So consider this idea: Let's tackle Washington's revenue challenges through tax hikes that mainly hit suburbanites and incentivize urban living. 

The need for more revenues is clear enough: federal taxes are near a 60-year low even as the Baby Boomers retire, China rises, infrastructure crumbles, and deficits stretch as far as the eye can see. Enough said on this point. 

As for waging war on the 'burbs, here also the rationale should be clear: An energy-intensive way of life that revolves around free standing single-family homes and driving everywhere just doesn't square with the ecological imperatives of our time. The latest climate research tells us that the entire world can only release another half trillion tons or so of carbon dioxide into the atmosphere without passing a fatal climate tipping point. That's a tight budget and, in fairness, the industrialized nations which have mainly caused global warming so far should do the most economizing. Which means that we Americans can't keep living like it's 1960.

The other argument against suburban life is that it's literally killing us. Obesity rates have skyrocketed partly because of the rise of car-centered suburbs, increasing early morbidity and jacking up rates for diabetes and other chronic diseases. These health problems, in turn, are helping fuel our fiscal problems by driving up spending on Medicare and Medicaid. And things will get much worse once legions of obese Boomers start to rely on government healthcare programs. We need to nip this problem in our fat butt. 

Finally, of course, is the point that suburban life has undermined the social capital that democracy depends on and eroded the community ties that human beings need to be happy. Loneliness has emerged as a huge problem in our highly atomized society, as Jacqueline Olds documented in her 2009 book, The Lonely American

Okay, so assuming you're sold at this point -- and dig downsizing the 'burbs -- the next question is how would tax policy help do that? 

Well, as it happens, the CBO just released a long list of options for reducing the federal deficit over the next decade and two of the options that would raise the most revenue would also deal a major blow to the suburban lifestyle. 

First, the CBO projects the federal government could generate nearly $1 trillion in revenue through 2023 by eliminating the deduction for state and local taxes. That's serious money, around equal to the entire savings from the brutal sequestration cuts. Of course, though, whacking this fat tax break would be brutal in its own way -- like, if you're living in Westchester, New York, and paying $25,000 a year in property taxes. Homeowners on both coasts would take a huge hit from this step. And while most of the benefits of the state and local tax deduction go to "affluent" households who itemize their taxes, it has to be noted that many of these people actually are just holding on -- strapped professionals paying bigger mortgages than they really can afford to send their kids to good schools. 

Many municipalities are just getting by, too, in fiscal terms, and eliminating the huge federal subsidy for local budgets would have serious consequences on services, including education. 

So ending this tax break is not an idea that should be taken lightly. But consider the upsides: If that big suburban home becomes less affordable, and those leafy school districts are less well funded, more young couples will stay in the city -- living in multi-family units and driving far less. They'll push harder to improve urban school districts, which will also benefits lower income kids. And they'll probably also be thinner, healthier, and happier. They might also be more economically successful, since greater concentrations of people tend to produce more business activity, as Richard Florida argues. 

The second giant revenue raiser on the CBO menu is a tax on greenhouse gas emissions, which the CBO says could raise just over $1 trillion through 2023. Again, that's big money and, again, suburbia would take a big hit. Remember, it's not just that Americans burn a lot of gasoline living in suburban car culture. They also burn a lot of oil and natural gas to heat large free-standing homes. And use a lot of electricity, which is still mainly generated by coal. 

To be sure, there are some important details to be worked out with a carbon tax given that lower income households spend a larger portion of their income on energy than affluent households. So we'd need to deal with that. 

Any way you slice it, attacking suburbia with fiscal policy will mean disruption -- and pain for someone. But this is also true of alternative ways to cut the deficit, such as ongoing Draconian budget cuts. More to the point, sticking to suburban business as usual will lead to rising sea levels, extreme weather, and worsening health.

It's time for Americans to move back to the cities, as many are already doing. And fiscal policy is the easiest way to move us back.