12 Other Revenue Sources

The previous chapters have covered important revenue sources such as income taxes, consumption taxes, and property taxes. This chapter outlines other revenue sources such as user charges (i.e., purchasing a government service or good) and license fees (i.e., purchasing the right to engage in a regulated activity). There are also a YouTube video and slides associated with this chapter.

User charges refer to prices set by the government for services that are publicly provided and voluntarily purchased by individuals, such as fares for public transit. License fees on the other hand involve the sale of permits that allow individuals or entities to engage in activities that are otherwise restricted or prohibited. Examples of license fees are for driver licenses, hunting, selling alcohol. This chapter also covers price discrimination which can be based on the demographics of the consumers (e.g., seniors, students) or origin of the consumer (e.g., in-state/county or out-of-state/county residents). For example, Eagle Creek Park in Indianapolis charges a different fee for residents of Marion County. Note that there are many other charges by the government for a variety of services. Sanitation charges cover services such as trash collection, landfill use, and sewage management. Public utilities (e.g., water and electricity) involve fees related to meters, connection, and consumption. Transportation and parking fees include fares for subways and buses, tolls for bridges and roads, landing and departure fees at transportation hubs, and parking fees at meters or in lots. Parks and recreation charges apply to amenities like public golf courses and permits for using tennis courts.

There are some equity issues associated with user charges since those charges usually do not take into account income and everyone pays the same charge (except in the case of price discrimination) and thus, user charges are regressive.