High Taxes That People Like
Posted by Matt Zeitlin on March 5, 2008
Chicago recently raised its sales tax to make it the second highest in the nation. If the Wall Street Journal editorial page was able to accurately read the temperament of most Americans, then we’d expect massive out-immigration from Chicago. Perhaps they’d all move to Delaware, which has incredibly low state taxes. But we don’t in WSJ editorial page world and it turns out that the states with the least “economic freedom”and the highest taxes have the highest populations. It’s easy to see why. First of all, there’s much less labor elasticity if you have an appealing place to live, and so people in New York City, for instance, are willing to put up with higher taxes. The slightly more sinister way of putting this is that people are essentially locked into cities for economic opportunity, and even if Delaware has lower taxes than Philadelphia, there isn’t exactly as much opportunity there.
And while it’s unfortunate that these jobs are (according to the WSJ) going to fund patronage jobs, surely people who live and work in Chicago know that patronage and petty corruption are as much a part of the city as the Cubs. Municipal income taxes are by their very nature easy to drive down by a race to the bottom. Cities’ jurisdictions aren’t that large and it’s relatively easy to buy goods outside of a city. So why exactly does the WSJ really care about how high municipal taxes are? It seems that by complaining about how desirable, populous places have high taxes, all they’re saying that high tax rates aren’t that bad. After all, you can pay high taxes and live in Chicago, and Chi-town’s tight!
March 5, 2008 at 9:53 pm
If the WSJ editorial board wants some low state taxes, they ought to come over here to New Hampshire. We and Alaska are the only states not to have any income or sales taxes, and Alaska has oil reserves to fall back upon. NH, by contrast, is forced to raise money by taxing property, cigarettes, and alcohol up the wazoo. It’s a great system, unless you like being able to afford kindergarten or children’s health care or any of that stuff.
March 6, 2008 at 7:34 am
Similar to Dylan, I think that it is not just the tax rate that is important– it is what you get for your tax dollars.
Take the rich suburbs. They tax a lot– yet somehow it always seems like parents of school aged kids seem to flock to them.
Similarly, I prefer (though currently not live in) an urban neighborhood with good mass transit and other amenities. That stuff ain’t cheap.