States charge fees for the use of certain services. These fees are based on the principle that people should pay according to the benefits they receive. In recent years, fees became one of the fastest-growing sources of revenue for state and local governments. However, these fees tend to fall more heavily on lower-income people. In some instances, a failure to pay trivial fees and fines or appear in court to dispute the charges escalates the situation and leads to consequences vastly out of line with the severity of the original misstep. This issue disproportionately affects disadvantaged populations, who often lack understanding of the legal system, are frequently incapable of hiring legal help, and may be unaware of available free resources.
Asset sales represent the privatization of government activity through the sale of public assets such as parks and open spaces. Such sales produce short-term revenue gains but can result in longer-term revenue losses and reduced future public enjoyment of assets.
State and local governments also levy utility taxes and a variety of user fees, including road tolls and fees for vehicle registration, park admission, and various permits. User fees may have great potential in the infrastructure area; they could be a source of funds for the maintenance and repair of roadways and utility systems.
Another type of fee assessed by states is an impact fee. States may levy impact fees on developers of commercial, industrial, or residential real estate projects to defray some of the public infrastructure costs that such projects entail.
User Fees and Asset Sales: Policy
User fees should not unfairly burden low-income people or unduly limit access to public services.
States should rely on user fees only when they bear a direct relationship to the services received. Charges should take into account the limited ability of low-income people to afford necessary services.
States should consider requiring developers to bear their fair share of development costs by funding infrastructure improvements, paying impact fees, or contributing to housing construction.