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I grew up in the City of Pittsburgh, which had a 4% wage tax (2% for the City, 2% for the Pittsburgh School District). It is considered the Number one reason for people to move out of the City. Unlike Real Estate Taxes, which has a direct relationship with real estate value, local income tax rate has no affect on income.
With Real Estate taxes, if you have two local governments, one with higher real estate taxes then the other, the real estate value of the local Government unit with the higher tax rate, will drop to compensate for the higher real estate taxes. Thus net tax paid in both local government will be about the same over the long haul.
Income taxes, on the other hand, has no affect on one's income, i.e. no matter how high the tax is, you have to pay it, and the only way to reduce your tax rate is to move to the local government with the lower income tax rate.
Thus the Pittsburgh combined wage tax of 4%, while the surrounding suburbs have only a 2% combined rate, drives people out of the City into the Suburbs. Real estate taxes do NOT do that, for if the rate is to high, property value drops, and with the lower property value comes less tax due. This had been seen over the last 30-40 years in the City of Pittsburgh, and has been listed as the number one reason people move out of the City proper.
You do NOT have that problem on the National or State Level, for the distance to move to avoid the higher Income taxes exceed the cost of commuting, but on the local level the savings of moving to a law income tax area in many cases, is more then the cost of commuting.
Now one of the problems with the City of Pittsburgh is that by State Law, Wage tax is only paid to the local Government you live in, NOT where your work (Philadelphia is the Sole exception to this rule, its wage tax applies to people who work in the City of Philadelphia but lives elsewhere, but only to the extent the Philadelphia rate is higher then the local government unit where the worker in the city of Philadelphia lives).
Just pointing out local income tax does more harm then good when compared to real estate taxes. I know California has A ban on local real estate rates, but maybe someone will get around to taking that ban to the US Supreme Court and get it stricken as unconstitutional given it taxes people differently depending on when their purchased their home. The Court has hinted that it would make such a ruling, even the conservative justices have made that hint, but no case has come up to it to do so, but that is getting off the subject, the subject is local income/wage taxes are a bad idea, just because such taxes work on the Federal and State Levels does not mean it works at the state level.
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