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New York is not the only U. S. city that cruelly overtaxes its real estate. Of all the taxes collected in the U. S. in 1938, some $4,745,000,000, or 32%, were local property taxes. Yet this was not enough to support the cities' own expenditures; unlike the Federal and State Governments, they spend a greater part of the total tax than they collect. In New York City, for example, $1,000,000,000 was spent by all three Governments last year; of this the city's own taxes (mainly real-estate) raised scarcely more than half. The rest was Federal and State contribution. But since real estate is already overtaxed, U. S. cities have no way (except by impossibly high sales taxes) to avoid reliance upon the Federal Government.
Planners like Tugwell have been batting up a novel solution to this problem: abolish local real-estate taxes altogether. Property owners would pay just an income tax, and that to the Federal Government. Even cautious politicos like LaGuardia have been intrigued. Last winter he told the New York Board of Trade he wanted just one big tax collector —the Federal Government. The taxes it collected from each city and State would be allocated back to them on a kind of credit system. Workable or not, this kind of arrangement would do two things: it would stop the tax race between the cities and the Federal Government, and it would put city real estate back in the ranks of viable business. It would also be another long step toward top-heavily centralized government. But Planner Tugwell, as always, was trading in futures.