Answer to Question 1
Erosion of a city's tax base is the declining tax revenue resulting from falling property values. Property values fall when the affluent citizens of the city leave to move to the suburbs because the demand for property in the city declines. As property values decline some individuals abandon property dropping property values even more. The result is the city government is forced to cut local services, increase the tax rate, or, generally, both.
Answer to Question 2
The government aided this trend (purchasing of houses by returning GIs) by providing low-interest mortgages through the Veterans Administration and the Federal Housing Administration, and interest payments on mortgages (but not rent) were made tax deductible. Property taxes in suburbs were much lower than in the city. Congress passed the Highway Revenue Act of 1956, which created the Highway Trust Fund. This legislation placed a tax on gasoline and earmarked the revenues to be used exclusively for building new roads. Ironically, the Highway Trust Fund perpetuates development. A new highway not only alleviates existing congestion, but also encourages development at farther locations, because time, not distance, is the limiting factor for commuters.
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