NCPA - National Center for Policy Analysis

States Are Raising Taxes Rapidly

April 26, 1999

According to new government reports, taxes are now rising as rapidly at the state level as at the federal, with double-digit tax increases last year in some states.

The Census Bureau says the 50 states collected more than $475 billion last year in various taxes and fees, or $1,762 for every man, woman and child in the U.S.

  • This was an increase of 7 percent over 1997, even though the national economy increased only 4.9 percent in 1998.
  • Overall, individual income taxes increased by 11 percent, with general sales taxes rising 6 percent.
  • Among the states, Utah led the pack with a total tax increase of 27 percent, followed by Maine (+17 percent), Connecticut (+15 percent) and Delaware (+14 percent).

On a per capita basis, Connecticut is the most heavily taxed state, with its citizens paying $2,869 each in 1998.

  • Nine other states also had per capita state taxes over $2,000, including Delaware ($2,665), Hawaii ($2,662), Minnesota ($2,434) and Massachusetts ($2,357).
  • The lowest taxed state was New Hampshire ($851), followed by South Dakota ($1,129), Texas ($1,246), Tennessee ($1,288) and Alabama ($1,318).

High-tax states like Connecticut and Massachusetts, for example, also have high incomes, while incomes are much lower in some low- tax states like South Dakota and Alabama. A better method of comparison would look at taxes raised as a share of the state's taxable capacity. A new Treasury Department study does exactly this.

According to the Treasury study, the most heavily taxed state, Connecticut, is 40 percent above the national norm. The figure lists the top 10 most heavily taxed states based on the Treasury methodology. Interestingly, New Hampshire makes the list despite having the lowest per capita tax collection, because it is taxing its citizens relatively heavily given their incomes and other taxable resources.

Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, April 26, 1999.


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