Haggerty & Haggerty: Rethinking Rural Fiscal Policy

In Rethinking Fiscal Policy for Inclusive Rural Development, authors Mark N. Haggerty (Senior Fellow, Center for American Progress) and Julia H. Haggerty (Resource & Rural Geography, Montana State) argue that the economic challenges facing rural communities cannot be solved without serious efforts to generate new conceptual and practical approaches to fiscal policy. This work is a chapter in a new book by the Federal Reserve of St. Louis, Investing in Rural Propserity.

In Rethinking Fiscal Policy, Haggerty & Haggerty reiterate the principles informing current fiscal policy, use several examples to demonstrate how the resulting institutional forms fail rural communities, and then highlight policy solutions they believe would better serve rural America.

The authors demonstrate two categories of state and local fiscal policy failures in rural economies: the failure to collect and manage natural resource revenue effectively and the barriers in generating revenue from emerging economic sectors. These failures create an inability to benefit from economic development, deeper dependence on declining resource sectors, and political opposition to policy objectives popular among urban voters.

First, authors claim the current method for use of natural resource revenue is the liquidation of public wealth and the erosion of institutional capacity during successive periods of boom and bust. Second, the authors state that tax reform is blocked by a number of legal and structural barriers imposed at the state level that actively prevent the realignment of local taxation even where the political will exists to raise taxes.

The authors argue solutions based in market theory have failed and a new fiscal system built around principles of public value, reinvestment, and local autonomy is needed. The authors argue that communities need tools to continue to generate wealth after resources are depleted and local governments must be innovative and resilient to make this possible. The authors argue major changes are necessary to resolve current crises of inequality, climate change, public health, and political resentment.