Why are some state taxes higher than others?

[doubled]

In New York City, I pay a roughly 8% state tax, plus a roughly 2% city tax. (This is in addition to a state sales tax and a local property tax.)
In Chicago, the state tax is only 3% and there is no city tax. Yet the city of Chicago seems to do fine with less money.

What expenses does New York have that Chicago doesn’t have? Why does New York need so much more money? Sure, a city like new york has to pay for parks and roads and police officers and public transportation and all that stuff, and I’m sure that is fabulously expensive. But Chicago has all the exact same expenses, and they manage to make do with far less money.

So where does all the extra tax money go in New York?

[Nametag]

Part of the mystery, solved by Wikipedia:

The city of Chicago has the highest total sales tax of all major U.S. cities.[28] It is also one of the most complex. 10.25% is levied on all non-perishable goods purchased, while 2% is levied on grocery items, drugs, and medical appliances.[29] There is an additional 1% tax, the Metropolitan Pier and Exposition Authority (MPEA) “Food and Beverage Tax”, on food and beverage purchases in the downtown area (roughly to North Avenue on the north, Halsted on the west, Roosevelt on the south, & Lake Michigan on the east). Car rentals in the city are taxed at 20%. Hotel rooms are taxed at 15.4%. Soft drinks (packs or cases) are taxed at 13.25%.

In New York City, total sales tax is 8.375%, which includes 0.375% charged for the benefit of the Metropolitan Transportation Authority (New York). As of January 4, 2006, New York State has again eliminated sales tax on all clothing and shoes up to $110.00 per item. Most counties and cities have not eliminated their local sales taxes on clothing and shoes. There are however, 11 counties and 5 cities (most notably New York City) that have done so.

[hajario]

States, counties and cities have various taxes and the rates are different everywhere. They just divide them up differently. Sales, real estate, hotel stays, “luxury” items, vehicles, personal income, business income, highway usage (toll roads and bridge tolls), public and private transportation, gasoline, use of public utilities and probably many hundreds of more things are taxed.

[Neptunian_Slug]

@doubled

In New York City, I pay a roughly 8% state tax, plus a roughly 2% city tax. (This is in addition to a state sales tax and a local property tax.)
In Chicago, the state tax is only 3% and there is no city tax. Yet the city of Chicago seems to do fine with less money.

What expenses does New York have that Chicago doesn’t have? Why does New York need so much more money? Sure, a city like new york has to pay for parks and roads and police officers and public transportation and all that stuff, and I’m sure that is fabulously expensive. But Chicago has all the exact same expenses, and they manage to make do with far less money.

So where does all the extra tax money go in New York?

You are assuming that income tax is the only tax collected. It is true that some states or municipalities have higher overall tax burdens than others. Some cities and states just spend more than others and therefore need more money. Other cities may have a higher percentage of lower income residents and need higher tax rates to be able to make up the difference.

But going by income tax alone would be wrong. My personal tax burden could be lower if I were to live in Delaware since they have a lower income and no sales tax. but I can’t say the the overall tax burden would be lower. My employer may have higher business taxes and fees which could translate into a lower wage for me or my landlord might have to pay higher property taxes which would mean higher rent.

[doubled]

@Neptunian Slug

You are assuming that income tax is the only tax collected.

No, not at all. New York has a higher property tax than Chicago, and nearly as high a sales tax. Aslo, since new york’s income tax is over three times that of Chicago’s, and since New York has lots and lots of very high income earners (tens of thousands of people here earn over a million dollars a year) then that income tax has to more than offset any difference in the sales tax.

So why does New York need so much more tax revenue?

[Tripler]

I have to ask the OP for a little clarification–there’s quite a few ‘taxes’ one has to take into account (and this ain’t an all inclusive list):

What I figure could be called ‘Personal/Consumption Taxes’–depends on what you make, and what you buy:
[ul]
[li]Income Tax (Federal, State, or Local) and Captial Gains taxes[/li][li]Sales Tax[/li][li]‘Sin Tax’ i.e. on tobacco, alcohol, etc.[/li][li]Gasoline or fuel taxes[/li][li]Lottery or game winnings’ taxes, should you hit the slots and win big.[/li][/ul]

Then there’s what I reckon are ‘Real or Property Taxes’:
[ul]
[li]Real Estate Taxes[/li][li]Ad Valorem Taxes for personal property like cars, boats, airplanes[/li][li]other miscellaneous assessed taxes[/li][/ul]

So, some states have high income taxes but no sales taxes (Montana). Some are low on both counts, like North Dakta.

Some have no income taxes under certain situations–like me for example: I’m officially a declared New Jersey resident, but so long as I’m stationed out of the state (active duty Air Force), Uncle $am does not withhold or charge me state income tax. However, I am liable to Georgia for all my real estate taxes and ad valorem for the truck.

Even better, is that when I’m overseas in the AOR, I don’t pay Federal income taxes. So, I pay off all my credit cards and save up for new toys for when I get back.

So, any combination can mean higher taxes in some, and lower in other. I’ve found that the tax structure depends on what sort of economy the state wants to foster, and what it has to maintain–take Montana for example. It doesn’t cost a lot to maintain a bazillion acres of grazing land, but they still need to garner funds.

Tripler
Just call me uncle moneybags.

[Chimera]

Some states garner a fair amount of money from mineral taxes - the oil states for one tend to have low or no state taxes.

[Mr.Duality]

@Chimera

Some states garner a fair amount of money from mineral taxes - the oil states for one tend to have low or no state taxes.

To clarify, “mineral severance taxes” are calculated as a percentage of the value of minerals transported out of the state.

[Neptunian_Slug]

@doubled

No, not at all. New York has a higher property tax than Chicago, and nearly as high a sales tax. Aslo, since new york’s income tax is over three times that of Chicago’s, and since New York has lots and lots of very high income earners (tens of thousands of people here earn over a million dollars a year) then that income tax has to more than offset any difference in the sales tax.

So why does New York need so much more tax revenue?

Your OP implied that personal income taxes were what you were concerned about.

But here are a couple of things that a NYT article pointed out. New York does have a higher tax burden.

Reasons include very large Medicaid costs and welfare costs compared to other cities. In addition, Chicago has Cook County which includes other cities that may subsidize its spending. New York is made up of five counties with New York County (Manhattan) subsidizing the other four boroughs. New York also has a much larger network of roads and bridges to maintain, many of which are not tolled.

Taxed: What Makes New York Different (Published 2007)

Cato outlines the New York tax burden here: Their reasons include a municipal work force that eats up about half of the city budget.

pa522.pdf

[Cervaise]

@Tripler

What I figure could be called ‘Personal/Consumption Taxes’–depends on what you make, and what you buy:
[ul]
[li]Income Tax (Federal, State, or Local) and Captial Gains taxes[/li][li]Sales Tax[/li][li]‘Sin Tax’ i.e. on tobacco, alcohol, etc.[/li][li]Gasoline or fuel taxes[/li][li]Lottery or game winnings’ taxes, should you hit the slots and win big.[/li][/ul]

Then there’s what I reckon are ‘Real or Property Taxes’:
[ul]
[li]Real Estate Taxes[/li][li]Ad Valorem Taxes for personal property like cars, boats, airplanes[/li][li]other miscellaneous assessed taxes[/li][/ul]

To add to the list, my home town of Seattle is fond of taxing the tourists: hotel rooms, rental cars, and the like are fractionally more expensive here due to government fees. We have no income tax, and our property and sales taxes are fairly high to make up the difference, so the city council has to be creative when seeking new sources of revenue.

I’d say this question will be difficult to examine unless one looks at total city revenue, total population, and formulates some sort of per-capita tax calculation (accounting somehow for taxes targeted at non-residents, like the above), to determine the true relative tax burden from city to city. I’d be willing to bet they’re a lot closer than one might assume, and that there’s a lot more variation in sources than in revenue.

[Little_Nemo]

In addition, Chicago has Cook County which includes other cities that may subsidize its spending. New York is made up of five counties with New York County (Manhattan) subsidizing the other four boroughs.

Why put it that way? If cities like Thornton and Wheeling are subsidizing Chicago, why say that Manhattan is subsidizing Brooklyn and Queens? Why assume the money is flowing from the smaller cities to the big city in Illinois but it’s going the opposite direction in New York?

[kdeus]

A cursory look at budgets and populations gives:

New York City
Budget $61 billion/ Population 8.2 million= $7,440/ per person

NYC Comptroller’s Annual Report 2007
Chicago
Budget $10.1 billion / Population 2.8 million = $3,540/ per person

Chicago Proposed Budget 2007

Now the Chicago one confused me, because I don’t understand the different categories (Corporate, Local, Local + grants?). I added “Corporate” and “Local + grants” to get total revenue. Your Math May Vary.

But it does look like NYC spends twice as much per person as Chicago.

[doreen]

@Cervaise

I’d say this question will be difficult to examine unless one looks at total city revenue, total population, and formulates some sort of per-capita tax calculation (accounting somehow for taxes targeted at non-residents, like the above), to determine the true relative tax burden from city to city. I’d be willing to bet they’re a lot closer than one might assume, and that there’s a lot more variation in sources than in revenue.

I’m not sure looking at total revenues will be enough. Different localities provide different services. For example, I know people who pay for trash collection by the container- in NYC, my taxes cover trash collection. It’s not common for a city to have its own public university (apart from the state public university)- in fact, NYC is the only city I’ve heard of with one. In looking at the Chicago proposed budget, I didn’t see public schools mentioned , while the NYC financial report includes the Department of Education - I assume the Chicago school district is a separate taxing entity.

[Really_Not_All_That_Bright]

Come to Florida. No state income tax, and it isn’t so freakin’ cold.

[GilaB]

Also, some states get much more back in funding from the federal government than they pay in taxes, while others get back significantly less than $1 for every $1 of federal taxes paid by residents and local companies. (I’ve read multiple articles about this over the years, but can’t find a cite at the moment.) I know that New York has for a long time gotten the the short end of the stick on this front, and presumably needs to make up the funding shortfall from somewhere.

[Cervaise]

@Really Not All That Bright

Come to Florida. No state income tax, and it isn’t so freakin’ cold.

But: bugs from hell.

[Really_Not_All_That_Bright]

@Cervaise

But: bugs from hell.

Well, there is that.

Also, possibility of summary disenfranchisement and other assorted electoral crises.

Still, you get what you pay for. I’d be inclined to complain about our Department of State and its best-known problem child - the Division of Elections - but as noted above, no state income tax, and mother always told me not to look a gift horse in the mouth.

@GilaB

Also, some states get much more back in funding from the federal government than they pay in taxes, while others get back significantly less than $1 for every $1 of federal taxes paid by residents and local companies. (I’ve read multiple articles about this over the years, but can’t find a cite at the moment.) I know that New York has for a long time gotten the the short end of the stick on this front, and presumably needs to make up the funding shortfall from somewhere.

New York, on balance, probably benefits from other states, rather than vice versa. It has the United Nations, which produces tons of local economic growth, which the rest of the country pays for (or would, if we ever paid our UN dues). It also gets/got sundry other freebies, such as the Statue of Liberty (besides guaranteeing freedom and all that, also responsible for many tourism dollars) and so forth.

Besides, most of the residents of New York are slowly making their way down to Florida anyway, so soon there won’t be anyone left to pay taxes there.

[FoieGrasIsEvil]

@Cervaise

But: bugs from hell.

As well as rampant humidity, skyrocketing insurance rates for homes due to hurricanes, and having…well, you know, all those old people there…

[UltraVires]

@Really Not All That Bright

Come to Florida. No state income tax, and it isn’t so freakin’ cold.

Yes, but property taxes are atrocious, homeowners insurance, when you can find it, is outrageous, and in today’s real estate market, I’ve estimated that if I absolutely had to sell my home today, I could get $4.11 for it…

[Really_Not_All_That_Bright]

@jtgain

Yes, but property taxes are atrocious, homeowners insurance, when you can find it, is outrageous, and in today’s real estate market, I’ve estimated that if I absolutely had to sell my home today, I could get $4.11 for it…

You must have missed that memo- you’re down to $3.97 in today’s dollars.

I’m a renter, so I can’t speak with authority here, but given your proximity to the coast I’m guessing your HO insurance is much higher than the usual rates here. In fact, aside from a mild panic immediately post-Frances/Charlie/whatever the other one was called, I haven’t heard anyone complaining about their HO premiums at all.