Taxing Risky Development: A New Tool for Increasing Coastal Resilience

Abstract

Coastal overdevelopment in the United States is a persistent issue. Climate change continues to increase the risk of flooding and other damage from natural disasters facing many coastal communities. Yet, development in some of the most at-risk areas has not slowed. Policies at the federal government level have encouraged such development by shifting costs of flood-related property damage from the property owner to taxpayers. At the same time, government actors at all levels are actively trying to protect their coastlines through coastal resilience projects. However, there are not enough funds to protect coastal property, especially at the state and local levels. Thus, coastal development continues to put more and more private investment at risk with no hope of governmental protection. This note proposes a risk-based tax on coastal development to counter incentives to overdevelop coastline while raising revenue for resilience projects. By utilizing a risk-based tax, the government that levies the tax can charge the property owner for the risk that has been shifted to the federal government through programs such as the National Flood Insurance Program. Further, a tax is preferable because it would be easier to administrate than other methods of slowing coastal development, like direct regulation. Finally, this note concludes that such a tax would encounter the fewest administrative and legal roadblocks if implemented at the state level.