Let's take this argument to its logical conclusion. NYC charges all residents an income tax to live in the city. Most other cities don't have such a tax, and th

Let's take this argument to its logical conclusion. NYC charges all residents an income tax to live in the city. Most other cities don't have such a tax, and this leads to the same prisoner's dilemma. Hence, every city should now be morally obligated to charge the same income tax that NYC does. Similarly for state income taxes as well. If that sounds absurd, I certainly think it is. Local governments shouldn't be trying to "profit" by taxing its residents and companies. The whole purpose of local taxes is to best serve local residents and companies. If a city/state can better serve its people by lowering its taxes or by offering tax credits for specific programs, it should certainly do so, even if there's no competition involved. There is no prisoner's dilemma here.