Do big cities subsidize their state or vice versa?

June 27, 2006 5:06 AM

Specifically, I'd like to know how much Chicago contributes to Illinois (in terms of taxes) versus how much it receives. Generally...

Generally I'd like to know if major cities tend to subsidize the rest of their state, or if it's the other way around, or if it just varies from state to state. Where would be the ideal place to find these kinds of statistics? My goole-fu is weak today.

posted by chndrcks to law & government (11 comments total)

I found a break-down of Illinios revenue and expenditures broken down by county. Illinois metro areas paid a total of $14,555,508,650 in taxes for the year 2000 and rural areas paid less than 10% that at 1,412,187,483. There are 10,541,713 people living in Illinois metro areas and 1,555,794 living in non-metro areas. So, 87% of the state pays 91% of the taxes.

The statistics I used were found at the 2004 Illinois statistical abstract.
posted by Alison at 5:44 AM on June 27, 2006

It's phrases like "87% of the state pays 91% of the taxes" that then go on to get quoted out of context by people who think that it's referring to land area, not population.
posted by dmd at 6:02 AM on June 27, 2006

Generally, yes. Cities subsidize the rest of the state: they are wealthier, they have more businesses, and they have economies of scale when it comes to public services. Doesn't it suck the way people outside the city always think they're subsidizing the welfare queens & socialists when it's really the other way around?
posted by dame at 6:17 AM on June 27, 2006

It's important to consider local vs. statewide revenue & spending streams, too. For example, most property taxes fund local services and schools. Likewise the local portion of the sales tax. But income and statewide sales taxes go into the general fund.

No matter what, there will always be asymmetries in taxes/spending.

If you want to have an interstate highway between Chicago and St. Louis, you are going to have spend huge sums in nearly empty counties - so its going to look like these low population areas get 'more than their fair share' of transportation funding. It's that way for a lot of physical infrastructure spending.

Service infrastructure spending tends to got the other way - urban areas get more per capita state-funding for education and social services and the like than rural areas.

So for me, the relevant question would be - what revenues are going into statewide collection programs (income taxes, the state portion of sales and fuel taxes, son on) and where is the money going out, program wise. Which is a lot more complicated to figure out.

And something else to consider - what about federal spending on local projects? Federal money is involved in everything from transportation to school lunch programs, so shouldn't it be considered as well? Which makes it even more complicated.
posted by Jos Bleau at 6:50 AM on June 27, 2006

When looking at the statistics Alison found, you have to remember, as well, that Cook county is not only the city of Chicago. There are actual other incorporated cities and townships (around 140 municipalities, I think) in Cook.
posted by crush-onastick at 6:54 AM on June 27, 2006

Cities subsidize the rest of the state: they are wealthier, they have more businesses, and they have economies of scale when it comes to public services.

Except when they're poverty stricken, blighted, and have low median incomes compared to the surrounding areas.
posted by malp at 7:53 AM on June 27, 2006

Yes, I suspect the old conflicts of urban vs. rural or Chicago Area vs. downstate are now superceded by City of Chicago vs. blighted suburbs vs. aging suburbs vs. growing suburbs vs. sprawling exurbs vs. everyone else.
posted by Jos Bleau at 8:49 AM on June 27, 2006

Doesn't it suck the way people outside the city always think they're subsidizing the welfare queens & socialists when it's really the other way around?

It also sucks when people make willy-nilly references to those studies without examining and decomposing how the studies measure the incidence of those taxes, and how those taxes and expenditures are counted and/or adjusted. In other words, do they count social security as a tax or a transfer? What about Medicaid? Do they assume that corporate taxes are paid by shareholders or consumers? Do they measure corn subsidies as a transfer from food consumers or from gasoline consumers? Do they measure Defense spending? Do they assume that everyone benefits equally from anti-terror spending?
posted by Kwantsar at 9:24 AM on June 27, 2006

Thanks for the links Alison, those were exactly the stats I was looking for. And thanks for the perspectives from Jos and Kwantsar. I was trying to keep the bias out of my question to avoid the derail, but it happened anyway.

I was trying to settle an argument between us downstaters and our Chicago friends, but it turns out we were all wrong; funny how that happens.
posted by chndrcks at 9:36 AM on June 27, 2006

You really do have to consider the federal tax dollars in the equation, because they're so critical to local economies in Illinois, as well as federal price protections, etc. Downstate is a huge consumer of agricultural supports. Chicago and the south suburbs are huge consumers of poverty and mass transit supports.

My guess of the "right" answer is that neither urban nor rural self-supports, and that both are supported by Chicago's north and western suburbs. Not there's any surprise to that, a dozen upscale belts (fiscally) support the whole country.

An interesting question is which place would do better if all transfers and supports were cut off. I suspect that Chicago would: defund welfare and public housing and privatize mass transit, and Chicago would probably become significantly better off in fiscal terms, particularly as the population adjusted to reflect the new (lack) of supports. Take away agriculture supports, though, and downstate would have some serious problems.
posted by MattD at 10:24 AM on June 27, 2006

Total derail, but I'd love the stat if he's got it.

Malp says: Except when they're poverty stricken, blighted, and have low median incomes compared to the surrounding areas.

Do you have any examples of this? US or International is fine. I don't believe there are any cities in this situation. No, not even Detroit.
posted by zpousman at 12:13 PM on June 27, 2006