Where Do State and Local Governments Get Their Tax Revenue?

 
 
October 09, 2009

Fiscal Fact No. 194

Introduction
Newly released Census data show how different the 50 states' fiscal systems are. Their reliance on various sources of tax revenue differs widely because they have different endowed resources and policy priorities. These differences are reflected in state-local tax collections no matter how large or small a fraction of the residents' income state and local governments have decided to take in taxes.

States heavily endowed with valuable natural resources, such as Alaska and Wyoming, will usually exploit those tax revenue sources, which they can do without too much fear of driving the activity out of state, given that those natural resources are largely immobile. States seeking a more progressive tax code tend to rely heavily on individual income taxes, all else equal.

Tables 1-4 are "top ten" tables, highlighting the states that rely heavily on each of four major categories: property taxes, individual income taxes, general and selective sales taxes,[1] and "licenses and other taxes."[2] The data are the latest available for states and localities, fiscal year 2007, which stretched from July 1, 2006 to June 30, 2007. Combined state-local data is best for interstate comparison because what some states accomplish with local taxes is accomplished in other states with state-level taxes.

Table 1

Which Ten States Rely Most on Property Taxes?

State

Fraction of Tax
Revenue Coming from
Property Taxes

New Hampshire

61.3%

Vermont

42.1%

New Jersey

41.7%

Texas

41.6%

Rhode Island

41.1%

Michigan

39.3%

Connecticut

38.2%

Illinois

37.1%

Florida

36.8%

Wyoming

36.8%

Note: Includes residential and commercial real
estate (mostly local revenue) as well as personal
property taxes on cars, boats, etc. (mostly state revenue).

Source: Tax Foundation calculations based on
data from Census Bureau's government finance
data for state and local governments during
fiscal year 2007.

Table 2

Which Ten States Rely Most on General and Selective Sales Taxes?

State

Fraction of Tax Revenue
Coming from Sales Taxes
(General + Selective)

Washington

62.1%

Nevada

58.2%

Tennessee

56.8%

South Dakota

54.1%

Arkansas

53.2%

Louisiana

53.0%

Hawaii

51.7%

Florida

49.0%

Arizona

48.4%

Alabama

47.8%

Note: The major selective sales taxes are levied
on motor fuel, tobacco, insurance premiums,
public utilities (power, telephone service, etc.),
amusements and alcoholic beverages.

Source: Tax Foundation calculations based on
data from Census Bureau's government finance
data for state and local governments during
fiscal year 2007.

Table 3

Which Ten States Rely Most on Individual Income Taxes?

State

Fraction of Tax Revenue
Coming from Individual
Income Taxes

Oregon

44.1%

Maryland

39.7%

Massachusetts

35.6%

North Carolina

32.7%

New York

31.8%

Virginia

31.6%

California

30.8%

Minnesota

30.5%

Connecticut

30.0%

Ohio

29.9%

Note: States and localities generally lump wages,
dividends, interest and capital gains together when
applying their individual income taxes.

Source: Tax Foundation calculations based on
data from Census Bureau's government finance
data for state and local governments during
fiscal year 2007.

Table 4

Which States Rely Most on Licenses and Other Taxes?

State

Fraction of Tax Revenue
Coming from Licenses
& Other Taxes

Alaska

52.6%

Delaware

34.1%

Wyoming

30.1%

North Dakota

20.7%

Montana

18.8%

Oklahoma

17.8%

New Mexico

17.5%

Nevada

14.3%

Oregon

12.6%

West Virginia

12.4%

Note: In license category, taxes are imposed on
motor vehicle licenses, business or corporation
licenses, and hunting or fishing licenses. In
category of other taxes, major revenue sources
are severance taxes (natural resources), stock
transfer taxes, and estate/gift taxes.

Source: Tax Foundation calculations based on
data from Census Bureau's government finance
data for state and local governments during
fiscal year 2007.

Table 5

State and Local Tax Revenue by Source, Fiscal Year 2007

State

Property
Taxes

General
Sales
Taxes

Selective
Sales
Taxes

Individual
Income
Taxes

Corporate
Income
Taxes

Licenses
and Other
Taxes

United States

30.1%

23.5%

10.9%

22.6%

4.7%

8.2%

Alabama

15.5%

29.9%

17.9%

22.7%

3.7%

10.2%

Alaska

20.9%

3.7%

6.3%

0.0%

16.5%

52.6%

Arizona

26.7%

40.1%

8.3%

16.1%

4.2%

4.6%

Arkansas

14.6%

41.3%

11.9%

23.7%

4.0%

4.4%

California

24.2%

24.2%

7.2%

30.8%

6.5%

7.2%

Colorado

30.4%

27.1%

8.2%

25.8%

2.7%

5.9%

Connecticut

38.2%

14.4%

9.2%

30.0%

3.9%

4.3%

Delaware

15.6%

0.0%

12.7%

29.3%

8.3%

34.1%

Florida

36.8%

33.2%

15.8%

0.0%

3.3%

11.0%

Georgia

28.8%

29.9%

8.6%

26.5%

3.0%

3.2%

Hawaii

17.3%

38.9%

12.8%

23.8%

1.5%

5.6%

Idaho

23.5%

26.8%

8.9%

29.6%

3.9%

7.3%

Illinois

37.1%

16.6%

17.2%

17.1%

5.3%

6.6%

Indiana

29.1%

25.7%

11.5%

24.7%

4.7%

4.3%

Iowa

33.1%

21.2%

10.4%

25.1%

3.0%

7.2%

Kansas

30.5%

26.6%

8.9%

24.2%

4.6%

5.3%

Kentucky

18.9%

20.6%

16.5%

29.5%

8.1%

6.5%

Louisiana

14.8%

40.0%

13.0%

18.3%

4.3%

9.6%

Maine

36.5%

18.7%

11.3%

24.2%

3.3%

6.0%

Maryland

24.2%

12.7%

10.6%

39.7%

2.9%

9.8%

Massachusetts

34.4%

12.7%

6.5%

35.6%

6.5%

4.3%

Michigan

39.3%

21.5%

10.5%

18.7%

4.7%

5.3%

Minnesota

25.8%

19.2%

12.6%

30.5%

5.1%

6.8%

Mississippi

25.3%

36.1%

11.7%

16.0%

4.3%

6.5%

Missouri

27.4%

26.2%

11.4%

27.0%

2.0%

6.1%

Montana

33.8%

0.0%

16.4%

25.5%

5.5%

18.8%

Nebraska

33.5%

24.3%

8.0%

23.2%

3.0%

8.0%

Nevada

27.5%

33.8%

24.4%

0.0%

0.0%

14.3%

New Hampshire

61.3%

0.0%

15.5%

2.3%

12.6%

8.3%

New Jersey

41.7%

16.8%

7.2%

22.7%

5.6%

6.0%

New Mexico

13.6%

36.1%

10.9%

15.8%

6.1%

17.5%

New York

28.4%

16.4%

7.8%

31.8%

9.3%

6.3%

North Carolina

22.5%

21.9%

12.1%

32.7%

4.8%

6.0%

North Dakota

26.8%

21.9%

13.3%

12.1%

5.3%

20.7%

Ohio

29.0%

20.5%

10.9%

29.9%

2.6%

7.2%

Oklahoma

16.2%

28.5%

9.7%

23.2%

4.6%

17.8%

Oregon

31.1%

0.0%

8.6%

44.1%

3.6%

12.6%

Pennsylvania

29.6%

17.0%

11.6%

25.5%

4.3%

12.0%

Rhode Island

41.1%

18.3%

10.3%

22.8%

3.7%

3.9%

South Carolina

31.1%

24.3%

10.9%

23.6%

2.3%

7.9%

South Dakota

34.2%

40.6%

13.5%

0.0%

3.2%

8.5%

Tennessee

24.2%

45.7%

11.1%

1.5%

6.1%

11.5%

Texas

41.6%

30.8%

16.0%

0.0%

0.0%

11.6%

Utah

22.9%

28.7%

10.3%

28.7%

4.5%

4.9%

Vermont

42.1%

11.5%

17.7%

19.9%

2.8%

6.0%

Virginia

31.0%

14.5%

11.9%

31.6%

2.7%

8.3%

Washington

26.8%

47.5%

14.6%

0.0%

0.0%

11.1%

West Virginia

18.7%

18.4%

19.3%

22.3%

8.9%

12.4%

Wisconsin

36.0%

19.0%

8.4%

27.1%

3.9%

5.5%

Wyoming

36.8%

28.3%

4.8%

0.0%

0.0%

30.1%

D.C.

29.3%

16.1%

9.4%

25.3%

8.1%

11.8%

Notes:
Property tax includes residential and commercial real estate
(mostly local revenue) as well as personal property taxes on cars,
boats, etc. (mostly state revenue).


The major selective sales taxes are levied on motor fuel,
tobacco, insurance premiums, public utilities (power, telephone
service, etc.), amusements and alcoholic beverages.


State and local governments generally lump wages, dividends,
interest and capital gains together when applying their individual
income taxes.


In license category, taxes are imposed on motor vehicle
licenses, business or corporation licenses, and hunting or fishing
licenses. In category of other taxes, major revenue sources
are severance taxes (natural resources), stock transfer taxes,
and estate/gift taxes.


Source: Tax Foundation calculations based on data from Census Bureau's
government finance data for state and local governments during
fiscal year 2007.

[1] The major selective sales taxes are levied on motor fuel, tobacco, insurance premiums, public utilities (power, telephone service, etc.), amusements and alcoholic beverages.

[2] Major fees are imposed on motor vehicle licenses, business or corporation licenses, and hunting or fishing licenses. Major tax sources are severance taxes (natural resources), stock transfer taxes, and estate/gift taxes.

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