[lzw]

However you want to characterize it, the thing that those who want to raise taxes need to understand is that there is a global economy, and if you punish success, you'll get less of it.

Washington benefited from this arrangement and the town of Vancouver wouldnt' be near as big as it is now if it weren't for the tax delta. And it wouldn't be bringing in as much taxes for Washington as it is.

At the same time, Oregon and Portland benefit as well, by having inexpensive housing nearby to supply workers and to facilitate faster growth than would be achievable if every business had to pay their employees more because all their employees were suffering from a state income tax.

[rbranson]

Historically cities lose out big time when they are situated up against state lines. Usually the suburbs located in other other cities with lesser service requirements will entice the tax income over the state line using incentives. They work in the city, therefore benefiting from a strong (and usually expensive) city government, and commute out into the other state. It's like a more extreme version of white flight, because it pushes taxes completely out of the state. The "inexpensive housing" you talk about is located in the inner city, not the suburbs.

In Memphis, where I live, most lower income people can't afford to live outside the bubble of city-provided public transit and/or social services. Even the middle class people live within the city limits, but on the very far outskirts. The wealthier people live outside the city in exclusive, incorporated suburbs where they avoid city taxes. Essentially the incorporated suburbs are designed as tax shelters for the wealthy. The wealthy people almost always work in the city and complain about the crime, poverty, crumbling roads, etc, but will dodge any tax that might help fix these problems.

We also have a pair of large middle class suburbs located just to the south of the city in Mississippi state. The county they're in is now the richest county in Mississippi. All of the income tax and most of the sales tax from these people who undoubtedly work in city is funneled out of the state of TN and into the coffers of MS. Every workday, they use our roads, police/fire protection, and by proxy, most of our other local gov't services. Most of which is paid for by people who are much poorer.

It is honestly a libertarians "see, I told you so" wet dream.