"Local Government Tax Policy: Measuring the Efficiency of New York City's Tax Mix, FY 1984-1998".

• Position: Brief Article

Berg, Janine; Marlin, John Tepper; and Heydarpour, Farid

Adopting financial policies that encourage the diversification of revenues is an important element of financial planning. All revenue sources have particular characteristics in terms of stability, growth, and sensitivity to inflation or business cycle effects. Understanding the volatility structure of different revenue sources can help governments handle fluctuations in revenues and better distribute the cost of providing services. This article examines New York City's tax policy and measures the "mix-efficiency" of the city's tax portfolio. The article applies the Markowitz portfolio model to consider the impact on growth and volatility of adopting tax-equity revenue policies. The Markowitz model assumes that for any given rate of growth there is a minimum level of volatility, and for...