New Report Compares State and Local Government Tax Revenue Sources
States Rely Differently on Property, Sales, Income, Other Taxes, Updated Census Data Shows
Washington, DC, August 27, 2010 – Four New England states rank in the top 10 most reliant on property taxes, and four Mid-Atlantic states rank in the top 10 most reliant on individual income taxes. These are among the findings of newly released Tax Foundation data on various sources of state and local tax collections for fiscal year 2008, the latest Census data available for both states and localities. “The 50 states rely on various sources of tax revenue due to different endowed resources and policy priorities,” said Tax Foundation Staff Economist Kail Padgitt, Ph.D., who co-authored the report. “States with valuable natural resources, such as Alaska and Wyoming, depend heavily on those tax revenue sources, while states with more tourism like Nevada and Florida rely more heavily on sales taxes so they don’t have to tax income.” “Foregoing one of the major taxes can improve the state’s tax climate, but it also means relying more heavily on the remaining tax sources for revenue,” Padgitt said. Tax Foundation Fiscal Fact, No. 242, “Where Do State and Local Governments Get Their Tax Revenue?” is available online at http://www.taxfoundation.org/news/show/26662.html. Combined state and local data is best for interstate comparison because what some states accomplish with local taxes, other states accomplish with state-level taxes, the report notes. The report lists the percentage of state and local tax revenue coming from property, general sales, selective sales, individual income and corporate income taxes, as well as licenses and other taxes. Nationally, states and localities are most dependent on property taxes (30.8%), followed by general sales and individual income taxes (22.9%), licenses and other taxes (8.2%) and corporate income taxes (4.3%). The 10 states that rely most on property taxes are New Hampshire (61.6%), Rhode Island (42.3%), New Jersey (42.2%), Florida (41.3%), Vermont (40.1%), Texas (38.8%), Michigan (37.5%), Illinois (36.8%), Wisconsin (36.2%) and Connecticut (36.0%). The 10 states that depend heavily on general and selective sales taxes (levied on motor fuel, tobacco, insurance premiums, public utilities, amusements and alcoholic beverages) are Tennessee (57.9%), Nevada (55.7%), South Dakota (54.3%), Louisiana (52.9%), Hawaii (51.5%), Arkansas (51.4%), Arizona (48.3%), Mississippi (47.0%), Florida (46.9%) and Alabama (46.8%). States that collect the highest percentage of revenue from individual income taxes include Maryland (40.4%), Oregon (39.7%), Massachusetts (36.8%), New York (33.6%), North Carolina (33.1%), Connecticut (32.5%), Kentucky (32.1%), Minnesota (31.5%), Virginia (30.9%) and Ohio (30.4%). Fees for licenses (motor vehicle, business and hunting or fishing), severance taxes on natural resources, stock transfer taxes and estate or gift taxes are also major sources of tax revenue for some states. The 10 states that depend most heavily on these include Alaska (73.1%), Delaware (33.5%), North Dakota (30.7%), Wyoming (28.6%), Montana (20.1%), New Mexico (19.0%), Oklahoma (18.8%), Texas (14.3%), Nevada (13.9%) and Oregon (13.2%). The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.