Taxes are used to fund government services, infrastructure, and public works projects and are an unavoidable cost of citizenship. While all Americans are subject to the same federal tax rates, the taxes they pay to their state and local governments varies depending on where they live — and these different taxes and tax rates can mean widely different tax burdens.
In some parts of the country, Americans pay as little as 6.5% of the state’s income per capita in taxes, while in others the average state and local tax burden is nearly double — as high as 12.7%.
Tax structure policy is one of the most powerful tools state and local governments have a their disposal. Certain tax structures incentivize certain behaviors and disincentivize others, often to achieve some defined outcome.
States and local municipalities can adjust tax policy in a variety of ways to boost economic activity, attract families and new residents, and take advantage of certain entrenched industries. In addition, states and local governments have certain budgetary obligations to take into account, such as road maintenance, school funding, and administrative costs, among others. All of these factors influence tax policy and the resulting share of income residents of a given region pay in taxes every year.
24/7 Wall St. reviewed each state’s tax burden — the portion of income that goes to state and local governments taxes per capita — from the report, “Facts & Figures 2018: How Does Your State Compare?” provided by tax policy research organization Tax Foundation.