Download State-Local Tax Accountability Rankings FY 2012 (PDF) Accompaniment and Bounded Tax Burdens Historic Data, 1977 – 2012 State-Local Tax Accountability Rankings: Methodology
A state’s tax accountability is the allocation of absolute accompaniment assets that goes to accompaniment and bounded taxes. But it’s important to bethink that as taxpayers, we not alone pay accompaniment and bounded taxes to our own places of residence, but additionally to the governments of states and localities in which we do not live.
How is this possible? This tax alive beyond accompaniment borders arises from several factors, including our movement beyond accompaniment curve during assignment and leisure time and the interconnectedness of the civic economy. What’s absolutely active this phenomenon, however, is the absoluteness that the ultimate accident of a tax frequently avalanche on entities added than those that address the analysis to the government.
Put simply, the accident of a tax is a admeasurement of which article pays the tax. But there are two actual altered types of tax incidence: acknowledged accident and bread-and-er incidence.
The acknowledged accident of taxes is borne by those with the acknowledged obligation to address tax payments to accompaniment and bounded governments. Acknowledged accident is accustomed by law, and tells us which individuals or companies charge physically accelerate tax payments to accompaniment and bounded treasuries.
The acknowledged accident of taxes is about actual altered from the final bread-and-er burden. Because taxes access the about prices adverse individuals, they advance to changes in alone behavior. These tax-induced changes in behavior annual some allocation (or all) of the bread-and-er accountability of taxes to be confused from those address the acknowledged accident assimilate others in society. For example, the acknowledged accident of accumulated assets taxes about avalanche on companies. But economists accede that some allocation of these taxes is confused advanced to others, in the anatomy of college prices for consumers, lower accomplishment for workers, bargain allotment to shareholders, or some accumulated of the three.
Once these tax-induced changes in behavior throughout the abridgement are accounted for, the final administration of the bread-and-er accountability of taxes is alleged the bread-and-er incidence. This admeasurement is additionally referred to as the tax accountability faced by individuals.
This abstraction is best illustrated by an archetype (shown below). Aback annual stations address motor ammunition taxes imposed on the auction of gasoline to accompaniment and bounded governments, it isn’t the businesses that acquaintance bargain assets as a aftereffect of the tax. In reality, the tax is anesthetized advanced to barter in the anatomy of college prices. Therefore, the article remitting the tax to the government (the business) is not the article that bears the ultimate accountability of the tax. The ultimate bread-and-er accident of the tax is confused from one accumulation to accession (businesses to customers).
This tax alive occurs to some bulk for about all types of taxes, and our tax accountability estimates annual for these shifts. Our abstraction is decidedly absorbed in how this tax alive occurs as it relates to accompaniment borders, or the alive of tax burdens from accompaniment association to nonresidents, a abnormality accepted as tax exporting.
Alaska provides the best archetype of tax exporting. Alaska is able to accumulated about 80 percent of its absolute accompaniment and bounded tax collections from association of added states. The basic disciplinarian of this is the state’s severance tax on oil extraction. In 2012, 67 percent of Alaska’s absolute accompaniment and bounded tax collections came from severance taxes. Keep in apperception that Alaskans pay no state-level tax on assets and face no state-level sales tax (though Alaska does accept bounded advantage sales taxes).
The accountability of Alaskan oil taxes does not abatement predominantly on Alaska residents. Ignoring this actuality and comparing Alaskan tax collections anon to Alaskan assets makes the tax accountability of Alaska association attending abundant college than it absolutely is. This abstraction assumes that abundant of the bread-and-er accountability of severance taxes avalanche on consumers of oil and oil-based articles beyond the country in the anatomy of college prices (rather than anon out of Alaskans’ pockets). To accommodate an authentic annual of how low Alaska residents’ tax accountability is, we admeasure Alaska’s severance tax accountability to added U.S. states based on oil and gas consumption. Once this allocation is made, Alaska’s accumulated tax accountability avalanche from amid the nation’s accomplished to the lowest.
Resource-rich states, such as Alaska and Wyoming, are alone some of the added acute examples of tax exporting. Above day-tripper destinations like Nevada and Florida are able to tax tourists, who are best generally nonresidents. Some states accept ample numbers of association active out of accompaniment who pay alone assets taxes to the states in which they work. Aback a burghal breadth attracts workers from adjacent states, a ample allocation of allowance assets in a accompaniment can be becoming by border-crossing commuters. On the added hand, some states accept advantage agreements in which they tax their own residents, behindhand of breadth they work. This abstraction accounts for these types of agreements.
Every state’s bread-and-er action is different, as is every state’s tax code. As a result, anniversary varies in its adeptness to consign its tax burden. Economists accept been belief this abnormality aback at atomic the 1960s aback Charles McLure estimated that states were extracting amid 15 and 35 percent of their tax acquirement from nonresidents.
Much of this artery tax accession occurs through no appropriate accomplishment by accompaniment and bounded legislators or tax collectors. Tourists absorb as they biking and abounding of those affairs are taxed. Bodies who own acreage out of accompaniment pay acreage taxes in those states. And the accountability of business taxes is borne by the employees, shareholders, and barter of those businesses wherever they may live. In abounding states, however, assembly accept fabricated a acquainted accomplishment to accountability taxes accurately on nonresidents. Common examples accommodate tax increases on auberge rooms, rental cars, and restaurant meals, and bounded sales taxes in resort areas.
The acumen amid tax burdens and tax collections is acute to compassionate tax alive beyond accompaniment lines. Because tax collections represent a annual of tax payments fabricated to accompaniment and bounded governments, they admeasurement acknowledged accident only. In contrast, our tax burdens estimates use a bounded accident archetypal to admeasure taxes to states that are economically afflicted by them. As a result, the estimates in this address attack to admeasurement the bread-and-er accident of taxes, not the acknowledged incidence.
Tax collections are advantageous for some purposes and cited frequently. However, adding absolute taxes calm by governments in a accompaniment by the state’s absolute assets is not an authentic admeasurement of the tax accountability on a state’s association as a accomplished because it does not accurately reflect the taxes that are absolutely paid out of that state’s income.
The authentic antecedent for accompaniment and bounded tax collections abstracts is the Census Bureau’s Accompaniment and Bounded Government Finance division, which serves as the basic ascribe and starting point for our tax burdens model. Actuality are a few added examples of the aberration amid tax collections (tallied by the Census Bureau) and our tax burdens estimates:
In accession to allocating the taxes cited above, this abstraction additionally allocates taxes on accumulated income, bartering and residential property, tourism, and adopted claimed assets abroad from the accompaniment of accumulating to the accompaniment of the taxpayers’ residences. For a abounding annual of accident assumptions and methods acclimated to admeasure tax collections to added states, see our alignment paper.
We accommodate all taxes appear by the Census Bureau’s Accompaniment and Bounded Government Finance division, the best absolute ability on accompaniment and bounded tax collections abstracts and our tax accountability model’s starting point. These taxes are:
Our time assemblage of admeasurement is the accepted accompaniment budgetary year (July 1 through June 30). Abstracts from the few states that use a altered budgetary agenda accept been adapted to the accepted accompaniment budgetary year. The accompaniment and bounded tax accountability estimates for budgetary year 2012 presented in this cardboard are based on the best contempo abstracts accessible from the Census Bureau, the Bureau of Bread-and-er Analysis, and all added abstracts sources employed. For a abounding annual of abstracts sources, amuse see our alignment paper.
First, abstracts on absolute accompaniment collections (as appear by the Census Bureau) are gathered, which gives us 26 tax categories with which to activate (listed above). Accident assumptions are afresh fabricated for these 26 categories. In abounding cases, the tax class is ample abundant that it charge be subdivided into added groups. For example, sales taxes calm by a accompaniment accommodate taxes paid by accompaniment residents, taxes paid by businesses, taxes paid by business travelers, and taxes paid by tourists, with tax accident differing beyond anniversary group. Sales tax paid by accompaniment association is borne by association of the accession state. Sales taxes paid by businesses and business travelers are acceptable borne by consumers nationwide, while taxes paid by tourists are borne by those individuals that catholic from accession state.
Tax class subdivisions (as needed) and accident assumptions are fabricated for anniversary of the 26 tax categories based on bread-and-er approach and empiric literature. Once an accident acceptance is made, an allocation adjustment charge be acclimated to accord accompaniment tax collections amid the accompaniment of abode and added states throughout the country based on our accident assumptions. Finally, assets aural anniversary accompaniment is afresh tallied so that absolute taxes paid by accompaniment association can be bidding as a allotment of absolute accompaniment income.
Since adapted actual abstracts is periodically appear by our abstracts sources, anniversary year we accumulated any adapted actual abstracts and recalculate the tax burdens of all 50 states all the way aback to 1977. This ensures that we are consistently application the best authentic accessible abstracts as inputs into our model.
Tax accountability measures are not measures of the admeasurement of government in a state, nor are they technically measures of the complete accountability of taxation faced by a accustomed state’s association (this abstraction excludes acquiescence costs and bread-and-er ability losses). Furthermore, the tax accountability estimates presented actuality do not booty into annual the acknowledgment to that taxation in the anatomy of government spending. These drawbacks, however, are not altered to our tax accountability estimates.
It is additionally account acquainted that these tax accountability estimates are not those of alone taxpayers. Our tax accountability estimates attending at the accumulated bulk of accompaniment and bounded taxes paid, not the taxes paid by an individual. We accumulated abstracts on the absolute assets becoming in a accompaniment (by all association collectively) and appraisal the allotment of that absolute that goes against accompaniment and bounded taxes.
State-local tax burdens of anniversary of the 50 states’ association as a allotment of assets are amassed absolutely aing to one another. This is analytic because accompaniment and bounded governments armamentarium agnate activities such as accessible education, transportation, bastille systems, and bloom programs, generally beneath the aforementioned federal mandates. Furthermore, tax antagonism amid states can generally accomplish affecting differences in the akin of taxation amid similar, adjacent states unsustainable in the continued run.
Therefore, it’s not hasty that tax burdens as a allotment of assets are absolutely aing to one another. Aback we present tax burdens as a allotment of assets as a about baronial of the 50 states, slight changes in taxes or assets can construe into acutely affecting accouterment in rank. For example, the 20 mid-ranked states, alignment from Delaware (16th) to Colorado (35th), alone alter in accountability by aloof over one allotment point. However, while burdens are amassed in the centermost of the distribution, states at the top and basal can accept essentially altered accountability percentages: the accompaniment with the accomplished burden, New York, has a accountability allotment of 12.7 percent, while the accompaniment with the everyman burden, Alaska, has a accountability allotment of 6.5 percent.
Nationwide, 22 percent of all accompaniment and bounded taxes are calm from nonresidents. As a result, the association of all states pay decidedly aerial shares of their absolute tax burdens to out-of-state governments. Table 2 lists the per capita dollar amounts of absolute tax accountability and assets that are disconnected to compute anniversary state’s burden, as able-bodied as the breakdown of in-state and out-of-state payments for the 2012 budgetary year.
The association of three states angle aloft the rest, experiencing the accomplished state-local tax burdens in the country: New York (12.7 percent of accompaniment income), Connecticut (12.6 percent), and New Jersey (12.2 percent). These are the alone three states breadth taxpayers abandon over 12 percent of their absolute aggregate assets to accompaniment and bounded taxes. This is over one allotment point college than the fourth accomplished burden, in Wisconsin, of 11.0 percent of accompaniment income.
New York, Connecticut, and New Jersey accept active the top three spots on the list, admitting not consistently in the aforementioned order, for several years. This may be partially attributed to aerial bulk levels, which charge be abiding by aerial levels of revenue. Furthermore, in the case of Connecticut and New Jersey, almost aerial tax payments to out-of-state governments add to already aerial in-state payments. This is acceptable accompanying to the actuality that these are advantageous states whose association acquaintance aerial levels of basic gains. Aerial levels of basic assets will aftereffect in association advantageous an added allotment of added states’ business taxes.
The states with the accomplished state-local tax burdens in budgetary year 2012 were:
The states with the everyman state-local tax burdens in budgetary year 2012 were:
Generally, there are three affidavit why a state’s baronial could change from year to year. First, there could accept been a change in absolute collections by the state, either due to action changes or bread-and-er fluctuations. Second, there may accept been a change in the akin of accompaniment assets due to alteration bread-and-er conditions. And third, added states to which association pay accompaniment and bounded taxes could accept apparent changes in tax collections (again due to alteration action or bread-and-er conditions).
In 2012, accompaniment incomes on boilerplate rose in absolute terms. The boilerplate absolute tax accountability additionally rose, but by a lower bulk than the access in income. This translated to lower tax burdens as a allotment of accompaniment incomes compared to 2011. Boilerplate accountability decreased from 10.1 percent of assets in 2011 to 9.9 percent in 2012.
The best arresting changes in accountability as a allotment of assets amid 2011 and 2012 occurred in California (decrease of 0.5 allotment points), Illinois (increase of 0.5 allotment points), and Connecticut (increase of 0.4 allotment points). Best states saw a abatement in accountability allotment (35 states), while eight saw an increase. Seven states’ accountability percentages remained the same.
Table 3 lists anniversary state’s accountability as a allotment of income, including rankings, for the three best contempo budgetary years available.
An absorbing ascertainment is that abounding of the least-burdened states abandon a above tax. For example, Alaska (50th), Nevada (43rd), South Dakota (49th), Texas (46th), and Wyoming (48th) all do after a tax on allowance income. Similarly, Nevada, South Dakota, and Wyoming abridgement a accumulated tax, and Alaska has no state-level sales tax (though it does acquiesce bounded governments to accountability sales taxes). While this is an absorbing correlation, it does not acknowledgment the causal catechism of whether levying beneath types of taxes leads to lower tax burdens or whether a political appeal for lower taxes leads to beneath types of taxes actuality levied. Additionally account because is the achievability that opting to not accountability a claimed assets tax causes a accompaniment to await added on added forms of taxation that ability be added exportable.
Not every accompaniment with a cogent bulk of adopted assets uses it to lighten the tax bulk of its own residents. Maine and Vermont accept the better shares of vacation homes in the country, and they accumulated a abundant atom of their acreage tax acquirement on those properties, mostly from association of Connecticut, Massachusetts, and added New England states. Despite this, Maine and Vermont still rank 13th and 11th highest, respectively, in this study.
Despite the accent of adopted collections and the accretion efforts to addition them, the active force abaft a state’s abiding acceleration or abatement in the tax accountability rankings is usually centralized and best generally a aftereffect of advised action choices apropos tax and spending levels or changes in accompaniment assets levels. This abstraction is not an endorsement of behavior that attack to consign tax burdens. From the perspectives of the abridgement and political efficiency, states can actualize countless problems aback they agilely about-face tax burdens to association of added jurisdictions. This abstraction alone attempts to quantify the bulk of alive that occurs and accept how it affects the administration of accompaniment and bounded tax burdens beyond states.
Nationally, boilerplate state-local tax burdens as a allotment of assets accept collapsed from 10.7 percent in 1977 to 9.9 percent in 2012. Chart 2 shows the movement of U.S. boilerplate state-local tax burdens aback 1977.
Some states’ association are advantageous the aforementioned allotment of their assets to taxes now as they were three decades ago, but in added states, tax burdens accept afflicted essentially over time. The tax accountability in every accompaniment fluctuates as years canyon for a array of reasons, including changes in tax law, accompaniment economies, and population. Further, changes alfresco of a accompaniment can appulse tax burdens as well. See Table 4 for actual trends in burdens by accompaniment (selected years).
Once again, Alaska is the acute example. Before the Trans-Alaska Pipeline arrangement was accomplished in 1977, taxpayers in Alaska paid 11.6 percent of their assets in accompaniment and bounded taxes. By 1980, with oil tax acquirement cloudburst in, Alaska repealed its claimed assets tax and started sending out checks to association instead. The tax accountability plummeted, and now Alaskans are the atomic burdened with a accountability of alone 6.5 percent of income. Added states that accept apparent cogent decreases in burdens are declared below.
Although best states accept apparent a abatement in tax burdens over time, some accept accomplished increases. Aback 1977, Arkansas taxpayers accept gone from some of the atomic burdened at 8.6 percent to some of the added heavily burdened with a accountability of 10.1 percent. Added notable increases include:
When barometer the accountability imposed on a accustomed state’s association by all accompaniment and bounded taxes, one cannot attending alone to collections abstracts for the governments amid aural accompaniment borders. A cogent bulk of tax alive takes abode beyond accompaniment lines, and this alive is not uniform. Further, this alive should not be abandoned aback attempting to accept the accountability faced by taxpayers aural a state.
 This is meant to be a simplified, adorning archetype of the aberration amid acknowledged and bread-and-er incidence. For a description of the accident assumptions our tax accountability archetypal uses for gasoline customs taxes see Liz Malm and Gerald Prante, “State-Local Tax Accountability Rankings: Methodology,” Tax Foundation, January 19, 2016.
 “State & Bounded Government Finance.” Census Bureau.
 Drenkard, Scott, and Jared Walczak. “State and Bounded Sales Taxes Rates, Midyear 2015.” Tax Foundation. July 1, 2015.
 McClure, Charles E. “The Artery Exporting of Accompaniment and Bounded Taxes: Estimates for 1962.” Civic Tax Journal 20, no. 1 (1967): 49–75.
 “State & Bounded Government Finance.” Census Bureau.
 Malm, Liz, and Gerald Prante. “State-Local Tax Accountability Rankings: Methodology.” Tax Foundation. January 19, 2016.
 “State & Bounded Government Finance.” Census Bureau.
 Malm, Liz, and Gerald Prante. “State-Local Tax Accountability Rankings: Methodology.” Tax Foundation. January 19, 2016.
 For all accident assumptions and a description of anniversary allocation method, see Liz Malm and Gerald Prante, “State-Local Tax Accountability Rankings: Methodology,” Tax Foundation, January 19, 2016.
 An account of the assets allocation of the archetypal begins on folio 17.
 Business taxes calm by states are allocated civic based on anniversary state’s allotment of basic and activity income. States with aerial basic assets tax ante will accept beyond basic assets about to added states.
 Walczak, Jared. “Nevada Approves New Tax on Business Gross Receipts.” Tax Foundation. June 8, 2015.
 The boilerplate bounded sales tax bulk in Alaska is 1.78 percent. See Scott Drenkard and Jared Walczak, “State and Bounded Sales Taxes Rates, Midyear 2015,” Tax Foundation, July 1, 2015.
 “Historical Census of Housing Tables: Vacation Homes.” Census Bureau, Census of Housing.
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