Desperately Seeking Revenues

Dwindling revenues and budget deficits are leading lots of municipalities in search of revenue enhancements – i.e. tickets, fees and fines. California’s “fix-it” ticket has tripled: It will cost you $100 for a broken headlight.

Thomas Garrett and Gary Wagner, looking at North Carolina data, find that the number of citations issued go up in years following a drop in revenues. The bad news seems to be that governments get hooked: Garrett and Wagner find that the rate of ticket issuance does not decline when revenues rebound.

Elsewhere, my colleague Thomas Stratmann and Michael Makowsky of Towson University have a forthcoming paper in the American Economic Review that shows that when it comes to traffic tickets, the incentives faced by officers really matter:

The farther the residence of a driver from the municipality where the ticket could be contested, the higher is the likelihood of a fine and the larger its amount. The probability of a fine issued by a local officer is higher in towns when constraints on increasing property taxes are binding, the property tax base is lower, and the town is less dependent on revenues from tourism. For state troopers, who are not employed by the local, but rather the state government, we do not find evidence that the likelihood of traffic fines varies with town characteristics. Finally, personal characteristics, such as gender and race, are among the determinants of traffic fines.

Putting these two papers together suggests that states and municipalities will be looking to increase revenue collections from out-of-area motorists. Interestingly, this is the opposite approach taken by Virginia, which in 2007 enacted (and then rapidly backpeddaled on) an “abusive driver fee” that would increase the costs to in-state drivers for certain offenses but leave the cost for out-of-state drivers the same.