Our local governments run on subsidized and unsubsidized taxes and fees. Subsidized taxes and fees are those that the federal government pays a portion of -- unsubsidized taxes and fees are those that our region pays the full cost of. (Apologies for the split prepositions).
The property tax is partially subsidized. The sales tax is totally unsubsidized.
You can tell the difference by checking to see if the tax is deductible off of federal tax returns. If the tax is deductible, then for every dollar of the tax for our local government that a resident spends, the resident sends a few dimes less to D.C. (the same financial impact as if D.C. sent a check for a few dimes for every dollar spent to the city government).
The sales tax is very high in Chicago. 8 3/4 percent, counting the downtown tax for McPier. Mayor Daley has floated a sales tax increase of 1/4 percent -- unsubsidized -- to 9 percent, among the very highest in the nation.
That's bad policy, because the tax is unsubsidized.
Better would be a local income tax, as that would be subsidized by the federal government. Philadelphia and New York City both levy a local income tax of about 3% on incomes over (about) $90,000. That cost of local government is picked up by the federal government. So if the New York City local income tax raises $900 million from residents, the federal government kicks in $300 million in the form of federal taxes unpaid, leaving the city residents to pay only $600 million. That's a smart way to bring in federal dollars.
The challenge is making sure you don't set the income tax too high to cause the wealthiest residents to leave the city entirely, as well as ensuring that the money is wisely spent so residents feel OK about being taxed. That's one reason why progressives need to constantly push for more efficiency in government and not tolerate lazy public employees.