Detailed Findings & Methodology
The states with the lowest tax burdens are often fiscally conservative with fewer budgetary obligations. As a result, not only are taxes low in those states, but also the per-capita debt. Total state and local government debt per capita across all states averaged $9,327 in fiscal 2015. Only three of the 11 states with the lowest tax burden borrowed more than that.
On the other hand, states with the highest tax burdens are often also bigger spenders, and as a result borrow more. Despite collecting more of residents’ income, eight of the 12 states with the largest tax burdens also have more debt per capita than the average across all states.
Aside from budgetary obligations, the local economy also heavily influences state and local tax codes. For example, states with strong tourism industries, like Florida and Nevada, capitalize on tourist spending with higher sales tax rates. An estimated 34.2% of state and local tax revenue in Florida and 39.7% in Nevada come from sales taxes, more than in most states and well above the 23.5% average across all states. Partially because of revenue generated through tourism, Nevada ranks among the states with the lowest tax burdens and is one of only a handful of states with no individual income tax.
In resource-rich states, like Alaska, Texas, and Wyoming, governments tax resource extraction, which in turn eases residents’ tax burden. Due in part to revenue generated by coal extraction in Wyoming and oil production in Alaska and Texas, neither of these states levies a personal income tax, and each ranks among the states with the lowest effective tax burdens.
In contrast, states where residents bear the heaviest tax burden rely heavily on property and and personal income tax. In Maryland, for example, the typical household earns $78,945 a year, the highest median income of any state. With a strong tax base, income taxes account for 37.6% of state and local revenue in Maryland, the second highest share of any state. The overall tax burden in Maryland is higher than in all but six other states.
Similarly, the typical home in New Jersey is worth $328,200, well above the $205,000 median home value nationwide. The state’s high property values translate to high government revenue. Per-capita property tax revenue in the Garden State amounted to $3,074 in fiscal 2015, the most of any state. Partially as a result, New Jersey has the third highest tax burden of any state.
To identify the states with the highest and lowest tax burdens, 24/7 Wall St. reviewed state and local tax burdens as a share of state residents’ income in fiscal 2012 provided by the Tax Foundation. Personal income per capita for each state is for 2016 and came from the U.S. Bureau of Economic Analysis. State individual income tax collections per capita are for fiscal 2016; state and local property tax collections per capita are for fiscal 2015; state general sales tax collections per capita are as of January 1, 2018; and all from the “Tax Foundation’s Facts & Figures 2018: How Does Your State Compare?” report. Sales tax rates, including combined rates, gasoline excise tax rates, cigarette excise tax rates, spirit and wine excise tax rates are as of January 1, 2018 and were also provided by the Tax Foundation. We also considered economic data including poverty rates and homeownership rates from the U.S. Census Bureau’s 2016 American Community Survey.
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