State-by-state comparisons of tax rates and tax burden are notoriously difficult. There are dozens of ways for state and local governments to tax citizens, workers, businesses, goods and services. Every state economy is different. So, every state tax system is different. Florida doesn’t have a state income tax – instead it charges a higher sales tax to capture cash from tourists. Alaska gets a lot of its tax revenue from special levies on oil drilling. Etc., etc.
Though when you mash all 50 state and the D.C. tax systems together, three kinds of taxes – income, sales and property – amount to more than 90 percent of state and local tax revenue. Economists and expert bean counters can debate this esoterica until bars run out of beer. But two measures give a credible snapshot of state-by-state tax trends over time:
Tax Revenue Per Capita measures total state and local taxes collected for each state resident.
Tax Revenue as a Percentage of Personal Income measures total state and local taxes as a percentage of total annual income earned by all state residents. This measure signals what overall portion of a state’s economy is invested in state and local government.
In both measures, the math is pretty simple. Add up all the taxes. Add up all the people. Add up all the personal income. Do some basic division to create tax burden ratios. And you end up with some bottom-line, apples-to-apples comparisons. It’s not perfect. But given all the tax code complexity nationwide, it gives a reasonable state-by-state comparison.
Or, in the more academic words of the Citizens Research Council of Michigan, which has compared state-by-state tax burdens at length: “Combined state and local government revenues provide the best comparison of taxation between states because of variations in revenue sharing and service obligations between state and local governments.”
All financial figures cited in this Bridge report are inflation-adjusted and presented in 2014 dollars. We did so using the U.S. Bureau of Labor Statistics Inflation Calculator.
Want more? Bridge obtained its comparative tax data for this report from three main sources: