The Sources of State and Local Tax Revenues

February 4, 2013

State and local governments receive their income from a variety of sources, according to a new U.S. Census Bureau report that breaks down total revenue by the various taxes and fees assessed within a state during fiscal year 2010. Elizabeth Malm and Ellen Kant of the Tax Foundation review the Census Bureau report and dissect state and local income by property, sales and gross receipt, personal income and other taxes.

  • In 2010, property taxes, including commercial and residential real estate taxes and personal property tax revenues, accounted for 35 percent of state and local government tax revenues.
  • New Hampshire relied on property taxes the most with more than 64 percent of its total tax revenue derive from property tax, while Arkansas relied on property taxes the least with only 18.3 percent of its tax revenue coming from property taxes.
  • Local government gets approximately 75 percent of its revenue from property taxes while states get less.
  • Sales and gross receipt taxes, which include select taxes on alcoholic beverages, motor fuels, pari-mutuels, public utilities and tobacco products, comprise 34 percent of total U.S. state and local tax revenues. Washington derived 60 percent of its total tax revenue from sales and gross receipt taxes; by contrast, Oregon only yielded 10 percent through these taxes.
  • Personal income taxes account for 20 percent of U.S. state and local taxes. Oregon derived 37.7 of its revenue from personal income taxes, followed by Maryland and New York at 35.6 and 31.2 percent, respectively. Seven states -- Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming -- have no personal income tax.
  • Only 3 percent of total U.S. tax revenue came from corporate income taxes. Alaska depends on the corporate income tax the most, receiving 10 percent of its revenue through this means; Texas, Washington, Wyoming and Nevada have no state-level corporate income tax.
  • Many states rely on a variety of other types of taxes, with the most common being on motor vehicle licenses. Other taxes, which amount to less than 10 percent of total tax revenues for 40 states, include severance taxes on natural resources, license taxes like those on hunting or fishing, stock transfer taxes, and estate, gift or inheritance taxes.

Source: Elizabeth Malm and Elllen Kant, "The Sources of State and Local Tax Revenues," Tax Foundation, January 28, 2013.

 

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