Tuesday, December 06, 2011

What Are Taxes Good For? The Case of User Fees in Fire Fighting.

Who needs public services funded by taxes? Let's see:
A Tennessee couple helplessly watched their home burn to the ground, along with all of their possessions, because they did not pay a $75 annual fee to the local fire department.

Vicky Bell told the NBC affiliate WPSD-TV that she called 911 when her mobile home in Obion County caught fire. Firefighters arrived on the scene but as the fire raged, they simply stood by and did nothing.


South Fulton Mayor David Crocker defended the fire department, saying that if firefighters responded to non-subscribers, no one would have an incentive to pay the fee. Residents in the city of South Fulton receive the service automatically, but it is not extended to those living in the greater county-wide area.
So it goes. The markets won't provide if you don't pay for the service. The reason the firefighters came at all is probably to be ready to stop the fire from spreading to those properties whose owners had paid the extra fee.

The market alternative (which the local government was using here outside the city limits) has its drawbacks. The most obvious one is that it increases the likelihood of larger fire damages for everyone.

Suppose that you pay for the firefighting services but neither your left-hand or right-hand neighbor does nor do the people living in the house behind yours. In theory, all those three houses could be on fire and the firefighters would wait and see if they need to protect your house. By the time the fire crosses your property line it might be crossing from three directions.

At the same time, the quoted argument about the necessity of not fighting the fire if the owners didn't pay the fees is a valid one. If you get the service without paying for it, why pay at all?

Hence the superiority of tax-funded services in cases like this one. Because taxes are obligatory.

This story reminded me of a historical incident I read about. One community in Finland, several centuries ago, created an early fire fighting unit by promising to pay certain farmers a fee, collected from the community, for each fire they put down. This progressive idea ran into some problems the next time harvests failed, because one group of farmers had a second potential source of income. So many farms suddenly lost barns to inexplicable fires.

What these two stories share is the importance of incentives and the lesson that some things really are better funded using non-market alternatives. In the case of fire fighting that means either tax funding of permanent employees or the use of volunteer fire fighters.