Ariel Jurow Kleiman (USC; Google Scholar) presents Redistributive User Fees at Duke today as part of its Tax Policy Seminar hosted by Larry Zelenak:

While theory suggests that redistribution should occur entirely through progressive income taxes, political and legal limits at the state and local levels render this ideal redistribution impossible. Public finance models offer user fees as an alternative revenue source that has the added benefit of improving allocative efficiency. The problem with fee-financing is that too many people can’t afford to pay fees for necessary or enriching public services. The result is deprivation and exclusion from vital state and local public services.

This Article identifies a middle way overlooked by the tax policy and public finance literatures: redistributive user fees. More accurately, these are fee-financed public services for which vulnerable users, like those with low-incomes or a disability, are exempt from paying the fee. These non-paying users receive a free service while paying users, in theory, pay a higher fee to subsidize them. The fees can appease Americans’ disdain for redistributive taxes while also minimizing the deprivation and exclusion that fee-financing often entails. 

The Article considers how redistributive user fees might work in theory and how they do work in reality. Short of offering a full throated endorsement of such structures, the Article poses several efficiency-related and legal concerns about them. It then turns to a bottom-up survey showing that redistributive user fees already exist. State and local governments use them throughout the country to achieve exactly the goals that the Article’s theoretical framework highlights and predicts. The Article finishes with an honest assessment of the potential of redistributive user fees, including both drawbacks and opportunities for reform.

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