States Without Income Taxes Rely on Varying Forms of Revenue

 
 
April 26, 2012
By 

According to the latest U.S. Census Bureau data, state-level individual income taxes make up the largest share of total state government tax collections. In 2011, state governments brought in $259 billion through these taxes, approximately 34 percent of total collections. However, there are currently 9 states that do not tax wage income (New Hampshire and Tennessee tax interest and dividends): Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. The composition of tax collections in these states varies considerably.

For example, Florida, South Dakota, and Washington each raised about 60 percent of their collections through sales taxes in 2011; nearly double the national average. New Hampshire collected 39 percent of its $2.3 billion of tax revenue from excise taxes (national average: 17.4 percent), and around 25 percent from corporate income taxes (national average: 5.3 percent). Alaska and Wyoming, both of which rely heavily on severance taxes on natural resource extraction, each collected a much larger percentage of their tax revenue from "other taxes" than the national average of 12.1 percent; 82.4 and 59.9, respectively. Besides severance taxes, this category includes state-level property taxes, death and gift taxes, documentary and stock transfer taxes, and licenses. Nevada and Texas each collect about half of their respective totals from sales tax collections, splitting the rest between excise and other taxes.

Since 2000, some of these states have seen large changes in the overall make-up of their tax collections, while others have stayed rather consistent. In 2000, over 30 percent of Alaska's tax revenue came from its corporate income tax; in 2011, that same figure accounts for less than 5 percent of total collections. This has not been caused by decreases in corporate tax collections, which in fact increased by 64 percent between 2000 and 2011, but by enormous increases in severance taxes. These tax revenues, included in "other" below, increased by nearly 600 percent in Alaska since 2000. In Florida, excise taxes increased from 16.6 percent of the total to 24 percent between 2000 and 2011. During those years, dependence on "other taxes" fell from 18.1 percent to 10.8 percent. On the other hand, the composition of tax collections in Tennessee and Texas has largely remained unchanged over the last decade.

After income, sales taxes make up about 31 percent of state government tax collections nationwide. Out of the five states that don't levy a sales tax (Alaska*, Delaware, Montana, New Hampshire, and Oregon), Alaska and New Hampshire rely on corporate income taxes over individual income taxes, with the opposite being true for Delaware, Montana, and Oregon. In every year since 2000, Oregon has collected over two-thirds of its tax revenue through personal income taxes.

Composition of State Government Tax Collections, % of Total, FY 2011:
States Without One of the Major Tax Sources

State

Income

Corporate

Excise

Sales

Other

Alaska

0%

13.0%

4.6%

0%

82.4%

Delaware

31.9%

10.7%

16.3%

0%

41.1%

Florida

0%

5.7%

24.0%

59.4%

10.9%

Montana

35.3%

5.4%

23.2%

0%

36.2%

Nevada

0%

0%

27.8%

46.3%

26.0%

New Hampshire

3.6%

25.1%

39.0%

0%

32.3%

Oregon

67.7%

5.8%

13.5%

0%

13.0%

South Dakota

0%

1.1%

25.0%

58.6%

15.3%

Tennessee

1.8%

9.8%

18.8%

57.0%

12.7%

Texas

0%

0%

27.8%

50.5%

21.7%

Washington

0%

0%

20.2%

60.8%

19.0%

Wyoming

0%

0%

5.1%

35.1%

59.9%

Note: Percentages may not sum to 100 due to rounding

*Alaska does not have a statewide sales tax, but allows local jurisdictions to levy sales taxes. For more info, see State and Local Sales Taxes in 2012.

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