Saturday, 11 July 2009

Should High Income Metro Receive Federal Tax Relief?

I have made point about how residents in high-income (and high productivity) area such as Coastal California or New York City are suffering from disproportionally high Federal Tax. There is interesting research from David Albouy, University of Michigan Economics professor. Here is summary:

"In the United States, workers in cities offering above-average nominal wages pay 30 percent more in federal taxes than otherwise identical workers in cities offering below-average wages. In The Unequal Geographic Burden of Federal Taxation (NBER Working Paper No. 13995), author David Albouy estimates that federal taxes lower long-run employment levels in high-wage areas by 15 percent, depress land prices there by 25 percent, and reduce housing prices in the area by 4 percent. Economists term these negative outcomes “locational inefficiencies,” and Albouy estimates that they cost taxpayers $34 billion in 2005. In the United States, highly taxed areas tend to be in large cities inside of populous states. Albouy conjectures that their higher tax burdens may be a reflection of their relatively low Senate rep

I also found his interview in Fox Business.

As I pointed out in previous posting, Federal government's return to CA/NY is only 80 cent on a dollar. Now that both CA and NY has severe shortage in state budget. It is time for CA/NY resident to stand up! Afterall, CA/NY are primary driver of industry and economy of the future.

Happy Investing!!!!

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