NCPA - National Center for Policy Analysis


October 31, 2008

The Tax Foundation estimates the combined state-local tax burden on residents of each states by calculating the total amount paid in taxes, divided by the total income in each state.  This year, researchers found that many states have made a conscious effort to raise taxes on non-residents, and that that effort seems to be accelerating.

Among key findings:

  • Tax burdens are down from 9.9 percent of income in 2007 to 9.7 percent in 2008, mostly because income growth outpaced tax growth as the macroeconomy slowed.
  • In 2008, the residents of New Jersey pay the most, 11.8 percent of their income; New York and Connecticut are the only other states where residents pay more than 11 percent, compared to a national average of 9.7 percent, and Maryland and Hawaii round out the top 5.
  • Alaskans pay the least, 6.4 percent, Nevadans pay 6.6 percent and residents of Wyoming, Florida, New Hampshire and South Dakota pay between 7 and 8 percent of their income in state-local taxes.

The true measure of the tax burden in any state must include the taxes paid by residents of other states.  In some cases the tax exporting is a wash; that is, a state collects about the same amount from non-residents as its own residents pay to out-of-state governments.  But in many cases there's a significant difference, say researchers.  For example:

  • In high-tax Connecticut, residents pay an estimated $7,007 per capita in taxes in 2008, and of that $2,509 goes directly or indirectly to out-of-state governments.
  • Alaska is the only state where residents actually pay more to out-of-state governments than to their own -- not because Alaskans pay so much to out-of-state governments, but because they pay so little to their own.

Source: Gerald Prante, "State-Local Tax Burdens Dip As Income Growth Outpaces Tax Growth," Tax Foundation, Special Report, No. 163, August 7, 2008.

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