Annual State-Local Tax Burden Ranking

October 31, 2012

For nearly two decades the Tax Foundation has published an estimate of the combined state and local tax burden shouldered by the residents of each of the 50 states. For each state, the authors compute this measure of tax burden by totaling the amount of state and local taxes paid by state residents to both their own and other governments and then divide these totals by each state's total income. This calculation is not only made for the most recent year, but also for earlier years due to the fact that income and tax revenue data are periodically revised by government agencies, say Elizabeth Malm and Gerald Prante of the Tax Foundation.

Malm and Prante seek to move the focus from the tax collector to the taxpayer.  Here are some examples of the difference between burdens (focusing on the taxpayer) and collections (focusing on the tax collector):

  • When Connecticut residents work in New York City and pay income tax to both the state and the city, the Census Bureau will tally those amounts as New York tax collections, but Malm and Prante count them as part of the tax burden of Connecticut's residents.
  • When Illinois and Massachusetts residents own second homes in nearby Wisconsin or Maine, local governments in Wisconsin and Maine will tally those property tax collections, but Malm and Prante shift those payments back to the states of the taxpayers.
  • When people all over the country vacation in Disney World or Las Vegas, tax collectors will tally the receipts from lodging, rental car, restaurant and general sales taxes in Florida and Nevada, but Malm and Prante count those payments in the states where the vacationers live.

Key findings from the study include:

  • Since 2000, state and local burdens have increased from 9.3 percent to 9.9 percent. During the 2010 fiscal year, however, burdens remained fairly stable, only decreasing slightly from their 2009 levels.
  • In 2010, the residents of New York, New Jersey and Connecticut paid the highest state-local tax burdens in the nation. These are the only three states where resident taxpayers forgo over 12 percent of income in state and local taxes.
  • Residents of Alaska, who have consistently been the least taxed state for nearly three decades, again paid the lowest percentage of income in 2010 at just 7.0 percent. The next lowest-taxed states were South Dakota, Tennessee and Louisiana.

Source: Elizabeth Malm and Gerald Prante, "Annual State-Local Tax Burden Ranking," Tax Foundation, October 2012.

 

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