There are many ways to try to understand how inequality within metropolitan areas is produced. Here, I will focus only on one of them: the role of the legal system. I will limit myself to a discussion of American law. In the United States, there are six legal steps that, taken together, help generate spatial inequality.

The first step is the law of incorporation – the legal rules that determine how new cities are established. To have a fragmented metropolitan area composed of different cities with radically different resources, one has to enable the creation of a lot of cities. For this to happen, one needs to make incorporation easy. A way to do so is to provide that incorporation can be accomplished simply by gaining the approval of those inside the proposed city boundary. Under this plan, outsiders would not be consulted even though the creation of the new city would no doubt affect them. The oddness of this approach should be apparent. Since no city exists at the time incorporation is being proposed, there is no uncontroversial way to determine who the insiders are; the boundaries have to be set before the insider/outsider distinction can be made. How these boundaries are set is important. In many cases, some people just outside the boundary want to be inside, while others inside want to be outside. Line drawers know this: excluding certain kinds of outsiders is not just the result of line drawing but, often, its purpose. If these boundary drawing problems can be overcome (by, say, allowing a legally-set percentage of landowners or citizens to draw the boundary lines in their petition for incorporation), adopting an insider-only rule for incorporations can generate a multitude of cities. On the other hand, if others nearby are given a voice in the matter, the process of fragmentation is likely to be inhibited. Giving these others a voice can easily be defended: after all, establishing a new city can have as much of an impact on them as on insiders.

Once the boundaries are set and the incorporation is accomplished, the next step is to determine who counts as an insider in the new city. One might think that this would be simple: those who live there are inside and everyone else is outside. The problem, however, is with the word “live.” It might refer simply to those who reside in the city – the people (the adults) who sleep there at night. But many people spend much of their lives in a city where they don’t sleep. Indeed, those who work in a city could easily spend more time inside the city than those who reside there. If these workers could be treated as inside (after all, they are there), it could have a big influence on city decision making. For example, many people might prefer to have their children in a school near their work rather than near their place of residence. That way, they could easily go to the school when necessary rather than travel miles and miles to the neighborhood where they reside. It would violate no Constitutional rights if such a policy were adopted. But if only residents are counted as insiders, they are likely to limit school admission to their own children, making such a plan unavailable. Moreover, the problem of determining who counts as insiders is much broader than just a reference to commuters. Many people who reside within city boundaries are not citizens of the United States. To include them as city voters would also change city policy; to exclude them limits the definition of insiders to only some residents. Similar decisions have to be made about ex-felons released from prison (and inmates of prisons located within the city), as well as the homeless (who reside there but not in a residence). And what about people who haven’t been in the city for years because, for example, they are away at college or in the military? Are they inside in the city? They aren’t actually there. But perhaps they can be counted as residents.

Assuming for the moment that insiders alone decide and that the insiders are (a limited set of) residents, the third step is determining whether the new city can prefer its residents over outsiders. One might think that the whole point of organizing a separate city is to allow this kind of preference. Why go to all the trouble to create a city for insiders if you can’t favor them over non-residents? We get, then, to the legal question: Can cities prefer insiders over outsiders? The law on this point is clear. The answer is: sometimes. The relevant provisions of the United States Constitution are the Commerce Clause, the Equal Protection Clause, and the Privileges and Immunities Clause. The last of these gives a good feel of the complications of the issue. The Privileges and Immunities Clause provides: “No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States.” (Don’t be misled by the reference to states; the Clause applies to cities in the exact same way as it applies to states.) The Supreme Court in Baldwin v. Montana Fish and Game Commission, 436 U.S. 371, 383 (1978), has provided an interpretation of the Clause:

Some distinctions between residents and nonresidents merely reflect the fact that this is a Nation composed of individual States, and are permitted; other distinctions are prohibited because they hinder the formation, the purpose, or the development of a single Union of those States. Only with respect to those “privileges” and “immunities” bearing upon the vitality of the Nation as a single entity must the State treat all citizens, resident and nonresident, equally.

Not surprisingly, making this distinction has been controversial – as have similar distinctions under the Commerce Clause and the Equal Protection Clause.

Assuming one finds a way for insiders, defined as residents, to prefer themselves over outsiders (at least for some issues), the goal of assuring insiders’ advantages over their neighbors still faces hurdles. The next step involves the laws of annexation and secession. If a city can readily be annexed by a bigger neighbor, its careful effort to separate its residents from outsiders will ultimately end in failure. The new city will be absorbed by another one. There are many different legal rules for annexation in the United States, but here I will mention only two. A referendum on a proposed annexation can be decided by putting the votes in one ballot box or two. The one ballot box idea is to have everyone in the proposed new city (after annexation) vote for or against the proposal, with all votes counted together in one ballot box. Under this plan, if the big city wants annexation and the small city doesn’t, the annexation goes through because there are more votes for annexation than against. The two ballot box idea requires a separate vote in each city – in other words, the annexation would gain approval only if both the residents of the annexing city and the residents of the annexed city, treated separately, vote for it. Under this plan, if the small city is against the annexation but the big city is for it, the effort would fail even though a majority of the whole number of voters are in favor. Both rules – both one box and two — have been held constitutional by the Supreme Court of the United States. It should come as no surprise that a one box rule produces more annexations – and thus less fragmentation of metropolitan areas – than a two box rule.

However one comes out on the annexation question, one still needs to consider the issue of secession. Clearly, a city of privilege would want to resist annexation. But what would its position on secession be? It might be for it – after all, secession from a big city is a way to create a new city. Indeed, if you think about incorporation again, most incorporations carve a new city from a surrounding county – in other words, incorporation is a kind of secession. A secession vote limited to those who want to secede, leaving out those from whom they are seceding, might therefore seem attractive. (Consider Crimea.) But this rule of secession could lead to problems even for the privileged city. After a secession creating a new city is achieved, an especially prosperous portion of the new city might then want to separate itself from it. Under a secessionists-only rule, it could do so on its own, without the consent of the rest of the city’s residents, thereby undermining the quality of life of those left behind. Moreover, once this favored section of the city secedes, why shouldn’t an even more favored subsection of that section secede from it? The secessionists-only vote idea, in short, has no limits. For these kinds of reasons, even privileged cities might oppose secessionists-only voting. Yet a secessionist-only voting rule is likely to produce more new cities than a requirement that everyone affected (those remaining in the city or county or territory as well as those seeking to secede) be entitled to vote on the secession. Those who want to create a new city for themselves might therefore opt for a secessionists-only regime.

Only after these four issues are resolved do we come to the more familiar final two steps toward inequality: zoning and revenue. Zoning rules are established by state law. States can enable cities to organize zoning in a way that excludes “undesirable” outsiders or that prohibits that exclusion. No doubt, there is a reason that some people want exclusion. Without exclusion, there is a good chance that poor people, seeing the advantages of living in the prosperous city, would want to move there. There is also a good chance that developers, seeing an opportunity to make some money by building these newcomers housing, would want to provide it. If this were allowed to happen, the privileged city would become more diverse. There is also no doubt that enabling exclusion has an impact on outsiders. Indeed, the whole point of having a separate city may be to keep outsiders outsiders – to ensure that they live elsewhere, not in the city seeking exclusion. Some kinds of overt exclusion (categorizing by race, for example) are now plainly against the law. But many kinds of exclusion remain possible – at least until the state decides otherwise. Those disadvantaged by this system – those who absorb the people the excluding city seeks to exclude – might therefore legitimately insist on a role in the decision making process. If they were given such a role, the concentration of wealth would begin to be undermined.

Only when we get to step six do we get to the usual focus for those who are worried about inequality: money. The design question for the revenue system is whether the prosperous city should be empowered by state law to tax its residents (and, perhaps, those who work or shop there) and to spend the money it raises only on insiders. A prosperous city might well embrace such an idea because, that way, local taxes are not spent on those less well off. After all, these poorer people don’t live in town once exclusionary zoning has done its work. One place where the impact of such a revenue design can most easily be seen is in the school system. Exclusionary zoning rules act as the admission office for the local school system – they create the student body. The tax rules then enable the schools to be supported in a way not available to poorer cities nearby. Since state law determines both cities’ ability to tax and the allocation of tax revenues, alternative revenue structures are available to prevent this result. Consider a regional mall, owned by outsiders to the region and used on a daily basis by people from across the region. Who gets the benefit of the property tax (or sales tax) from this mall? The mall might properly be understood to be in the city where it is located – but it is also in the region where it is located (and in the state where it is located). What are the proper boundaries for determining where taxes should be raised and spent? The revenue question, in other words, is not whether a city should “share” its tax revenue with other cities. The question is: who is entitled to the revenue? Tax revenue is a city’s to keep or share only if the state decides that the revenues are properly its money and not that of a larger community.

You may have noticed that I have not said in this short essay what the law is on these six steps in the United States. I have omitted this ingredient for a reason: I want the reader to see that there are choices to be made in resolving how to deal with each of the steps. Moreover, it is important to recognize that, to generate metropolitan inequality, the favored locality must win on all six steps. A change in any one of them can help undermine the distinction between a prosperous city and its poorer neighbor. Perhaps a word will relieve your curiosity. In much of the United States, the inequality-generating option has been adopted for each of the six steps. But for every step, somewhere in the United States, there are dissenting jurisdictions – some states have adopted a different rule. There is, in other words, a debate within the legal system about each of these steps, albeit one with, at the moment, a clear winner. The key location for this debate is the state legislature, even though it is currently not much of a focus there. The reason that this location is key is that all six rules are determined by state law. (“Home rule” has nothing to do with this issue.) The politics that determines the legal organization of cities is state politics. This discussion of state law, therefore, should open up a discussion of state politics.