How One City Taxed Itself Into a Recession and Back Out Again

When a mid-sized American city tried to balance its budget by raising property taxes, it accidentally triggered the fastest local economic contraction since the 1970s. Lucas and Luna unpack the case of Allegheny County, Pennsylvania, which hiked millage rates by 22 percent in 2023 only to see assessed values collapse, business licenses drop by 14 percent, and sales tax revenue fall below pre-hike levels within 18 months. They trace how the county's own economic model failed to account for behavioral feedback—and what happened when officials reversed course, cutting rates by 9 percent and replacing the lost revenue with a modest local services tax. The episode walks through the multiplier dynamics of local taxation, the difference between static and dynamic scoring in municipal budgeting, and why the 'Laffer curve moment' for property taxes may be lower than most city managers assume. A concrete case study in how fiscal policy at the local level can misfire—and how smart corrections can stabilize without austerity. #AlleghenyCounty #PropertyTax #LafferCurve #LocalTaxation #FiscalPolicy #MunicipalBudgeting #TaxMultiplier #DynamicScoring #StaticScoring #EconomicContraction #Recession #MillageRate #SalesTax #BusinessLicenses #PublicFinance #Economics #FexingoBusiness #BusinessPodcast Keep every episode free: buymeacoffee.com/fexingo