It's reasons like this why I think the post-COVID death of the high-COL city is greatly exaggerated.
Because we live in a federal system, the definition of what is "locally" taxable and what is not varies betweens states, and at a global level this varies between countries (the US taxes global income, which is uncommon), and obviously these entities are not inclined to do things that would reduce their funding. Even if they could reduce some taxes and raise others to make up for it and the end result made "more sense", how to raise others is a big fight in and of itself, and so they usually don't go through the bother of debating all of this.
These types of debates have already happened to some degree; a lot of New Jersey residents work in New York, and the way the dust has currently settled is that New Jersey will credit income tax paid in NY by NJ residents. Not everyone is happy with this arrangement, and whether or not it is working optimally could be debated until the heat death of the universe, but it is a valid allocation of resources that is working at some minimal level. This will probably blow up now that remote work enables a nearly endless combination of jurisdictional fights.
Yes, i love these points especially the last one. With remote, it’s no longer just two neighboring regions but so many different possible combinations.
Because we live in a federal system, the definition of what is "locally" taxable and what is not varies betweens states, and at a global level this varies between countries (the US taxes global income, which is uncommon), and obviously these entities are not inclined to do things that would reduce their funding. Even if they could reduce some taxes and raise others to make up for it and the end result made "more sense", how to raise others is a big fight in and of itself, and so they usually don't go through the bother of debating all of this.
These types of debates have already happened to some degree; a lot of New Jersey residents work in New York, and the way the dust has currently settled is that New Jersey will credit income tax paid in NY by NJ residents. Not everyone is happy with this arrangement, and whether or not it is working optimally could be debated until the heat death of the universe, but it is a valid allocation of resources that is working at some minimal level. This will probably blow up now that remote work enables a nearly endless combination of jurisdictional fights.