While researching various cities’ debt service statistics I stumbled across this handy table in an analysis of the Philadelphia budget:
As you can see, Chicago’s tax burden is higher than any other major U. S. city except for Philadelphia and Detroit. Good company. Since that table was prepared Illinois increased its personal income tax rate from 3% to 5% so I think it’s reasonable to suspect that our position has risen. In the sense of getting worse, I mean.
I note as an aside that there are three cities on that list where I either have lived or might live some day, (Chicago, LA, NYC) and all three are on the high end.
It would also be interesting to see which of those cities is a net recipient of federal tax largesse via SS. Medicare and Defense. I’m looking at you, Phoenix and Jacksonville.
Three of the cities on the list (Columbus, Indianapolis, Phoenix) are state capitals. I should point out that the cities on the list aren’t the largest cities in the country. They are the most populous cities from a particular study.
How would that affect tax rates?
Also, interesting that Chicago makes this list of “top ten tax friendly cities.” Weird.
There’s a marked difference between how the Kiplinger report that you cited calculates tax burden compared with the study that I cited. The Kiplinger report see the tax burden here as under 7%.
The date on that report is 2009. That may account for part of the difference.
How would that affect tax rates?
If the feds are pumping tax dollars in, I suppose the locals don’t have to.
For example — and I don’t know if this applies above — in a defense-heavy area the DoD is paying for medical on its employees, a share of the population. Let’s say 10% are DoD in City A and 0% in City B, both with identical populations of one million people. Doesn’t City A have more taxpayers per recipient of local largesse? Shouldn’t that mean lower percentages per resident?
This looks like the original study (PDF File), which compares tax burden for various income levels for all the state capitals. What’s interesting is that Chicago starts at the 10th highest and fall steadily as income rises.
Very high sales tax and low real estate tax. Much more regressive than I would have expected for Chicago. More like what I would have expected for Houston, but then that’s why we need to look. Reality has all of these neat little twists.
Steve
The property tax rate is misleading. Unlike in, say, Los Angeles, properties are reassessed triennially. Properties assessed in 2010, 2011, and 2012 have not been reassessed downwards despite a decline of 25% (and continuing) since peak. That means that even without increases in the nominal rate the effective property tax rate has been rising since the end of the recession. Since nominal rates have been rising as real values (but not assessed values) have fallen, the real rate has risen a lot.
One possible reason for the high city sales tax is that state law limits the increase in total property taxes on existing property to a 5% increase or the increase in the national Consumer Price Index for the year preceding the tax year, whichever is less. The state doesn’t similarly limit retail sales tax.
Michael,
I think it depends. For a state with an income tax, most uniformed military people won’t be paying that since they won’t be residents of the state. If they live in military housing, they won’t be paying property taxes. The feds do, however, provide money to prevent military people from free-riding in the local public school districts. I’m not sure how much that is, though I know it exists because I’ve filled out the paperwork. Military people also have access (depending on the base) to military department and grocery stores which don’t collect any sales taxes.
But on the other hand, a military installation is a big employer and most of those jobs are well-compensated and stable. But I don’t see any real correlation between military bases and local tax rates. The top states in terms of uniformed military personnel are: Texas, California, North Carolina and Virginia. The fewest are: Vermont, West VA, Iowa and Oregon. Kind of a mixed bag tax-wise.
PS, the study I linked to is not state capitals. Total brain fart.
Yeah, but now we’re comparing apples (cities) to oranges (states.) You’d have to dump a whole lot of people into California’s 30+ million to have any effect, but if you concentrate them in San Diego it’s a different matter.
Michael,
Glancing at some quick numbers it looks like the San Diego area is about the same as the rest of California. It would be interesting to see a more rigorous study of this but I’m not seeing any obvious patterns.
The weather alone would keep me out of those high-tax cities. A person has to be nuts to choose those rust belt cities over LA, Houston, Phoenix and Jacksonville.