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Testimony to Vermont Blue Ribbon Tax Structure Commission: The Role of the Lottery in Vermonts Tax Policy

Tue, 17 Nov 2009 00:00:00 EST

Thank you for inviting me to testify today.

First I'd like to explain why any discussion of tax reform merits an examination of the state lottery.

The lottery is an implicit tax, No state government labels lottery profits tax revenue, but they should. The lottery must be evaluated as a tax, and when we subject it to the tests of sound tax policy, it fails.

In 2008 lotteries generated over $60 billion in consumer spending. This translated to a profit for state coffers of over $17 billion. Slightly over half the money spent is returned to players as prizes. Part of the remainder covers operating costs-including vendor commissions, equipment, administration and advertising-and the rest is transferred to state coffers. States call their portion "profit" but it is actually implicit tax revenue.

Lottery proponents argue that a tax is a mandatory payment, and playing the lottery is voluntary, so lottery revenue cannot be tax revenue. But they're confusing the purchase of a product with the payment of the tax on the product. Purchasing a lottery ticket is voluntary, but the tax portion of the ticket price is not, just as a sales or excise tax is compulsory on a voluntary purchase of alcohol, clothing or books.

State-run lotteries fail the tests of sound tax policy in multiple ways: They are not economically neutral, they are not simple to administer, and they are not transparent. The tax system should be as clear and simple as possible; taxpayers should understand what is being taxed and what the rates are. The lottery tax, however, is hidden. The state creates a monopoly for itself and builds the tax into the price of the tickets, then advertises the lottery as a recreational activity rather than a revenue-raising activity.

In FY2008, the implicit tax rate on Vermont's lottery tickets was 28%.¹ Can anyone imagine walking into a Vermont store and paying a 28% sales tax on a board game, iPod, video game or any other recreational item?

It's important now more than ever to examine the government's reliance on lottery tax revenue for two reasons: states' attempts to use lottery revenue to deal with state budget shortfalls and the simultaneous decrease in lottery revenue.

Although it initially seemed that lottery revenue was recession proof, revenue has now fallen slightly. According to a report from the Rockefeller Institute of Government,² state revenues from all sources of authorized gambling fell 2.8 percent in FY2009, Lottery income, the largest source of state gambling revenue, fell 2.6 percent. Vermont's lottery profits (implicit tax revenue) dropped 7.7%.

This desire on state's parts to fill coffers with gambling revenue could be a boon for the gambling industry as well, and the combination of desperate state treasurers and gambling companies both looking tor more money has led to a slew of new lottery proposals, products and marketing strategies, some of which I will describe.

More states are turning to video lottery terminals (VLTs), especially at state racetracks. VLTs are one type of lottery game that has not suffered during the recession. VLTs are more like casino games than traditional lotteries, and lottery critics often argue that they're more likely to cause gambling addictions. From a tax policy standpoint, they pose a transparency problem in that people who play VLTs may not even realize they're playing the lottery; when we think of playing the lottery, we think of buying a ticket, not playing slots at the track.

Another tactic that a few state lotteries have taken is attempting to allow players to place bets on the internet. In March 2005 the Georgia House—but not the Senate—passed a bill that would have allowed the lottery to create individual online accounts so players could purchase tickets on the agency's Web site. Two other states have since considered this plan.

Next are casino-style table games. The New York Lottery is permitting state-run casinos to add video roulette, craps and blackjack to the already extensive array of New York State Lottery products. It seems likely that this trend will continue in many other states, even though casino table games certainly do not seem like lottery games.

Lotteries are also focusing more than ever on marketing, and some are partnering with sports franchises to draw in more players. Maryland, for one, has partnered with the Baltimore Orioles and the Baltimore Ravens to promote bubble gum-scented scratch-off tickets, to sell lottery tickets at sporting events, and to offer season tickets as prizes.

One trend that's constantly in the media spotlight is that lottery jackpots are becoming larger. Not surprising, this has coincided with increasing ticket prices One dollar used to be the most common price for a ticket, but many states have recently increased the price of some of their instant tickets to $10, $20 or even $30. When the Michigan Lottery introduced a $50 ticket, it sold out after less than three days.

The most recent development is that Powerball and Mega Millions, once considered rival games, have joined forces, and states will now be able to offer both high-jackpot multistate games.

Finally, while this is not exactly a new development, there is more evidence of lotterys' regressivity, meaning that the lower-income players spend a disproportionate amount. In June the Indianapolis Star looked at Hoosier Lottery's sales data and public data and found evidence that the lower-income players spend a disproportionate amount on the state's lottery.³ They also found that lottery billboards were placed more often in lower-income neighborhoods. Lottery players throughout the country tend to have lower incomes and less educations, and state lottery agencies that are determined to rely on the lottery to handle budget crises will probably have to market heavily to this demographic.

To close I'd like to read a quote from the Feb. 2008 issue of International Gaming and Wagering Business (IGWB) magazine.⁴ The quote is a bit long but it will make the point that the methods used to raise huge amounts of lottery revenue currently and in the near future are probably not palatable to most principled lawmakers:

"The lottery industry is under tremendous pressure to continue to perform and provide ever-increasing revenues," said Maryland Lottery Director Buddy Roogow. "The environment in which we work is becoming increasingly competitive because of the internet, because of the explosion of casinos and racinos around the country, and because of the interactive games that are available ....

In light of Roogow's comments, lotteries can't rely on the same combination of lotto and numbers games that have served them well over the years. U.S. lottery sales this decade have been driven primarily by mega-jackpots in the multi-state lotto games, and by increasing price points, and payouts, for instant tickets. ...

Lotteries in Europe have generally not seen the rapid growth of instant ticket sales that American lotteries have seen, primarily because the price points and prize payouts haven't changed significantly, noted Matthew Mansfield, Vice President of Product Marketing and Design for GTECH Corp. . . .

Lotteries fortunate enough to have monitor games are reaping the benefits of a product category that is receiving a lot of attention from vendors. More than a dozen U.S. lotteries offer those games, which generally begins with keno and are often limited to social environments such as bars and clubs.

"Monitor games are probably right now the areas of great interest and development potential for the marketplace in the United States," said Mansfield. "It's clearly an opportunity to provide more visual entertainment for the players and diversity of game to choose from."

He envisioned a future where retail venues could offer monitor "walls" similar in concept to some of the instant ticket displays currently on the market. Multiple monitors would offer multiple games, and players would choose the games they want. ...

Currently on the market are versions of poker, horse and car racing, and more are in the works. ...

"We can now put virtually any game you ca think of on a monitor," said Maryland's Roogow. "Monitor games are part of where the future lies for us. ... I think they allow us to penetrate the emerging market more effectively...young people who may go to bars and restaurants, places where they can congregate. "

"I think what' important for the future of lotteries...is distribution—getting where the customers are ...into more nontraditional outlets that in the past have been unapproachable," said [Louisiana Lottery Vice President of Marketing Bonny] Botts. "These include places like drugstores, big box retailers, even the corner Starbucks."

1. For an explanation of how the implicit tax rate is calculated, see Alicia Hansen, Tax Foundation Background Paper No. 54, "Gambling with Tax Policy: States' Growing Reliance on Lottery Tax Revenue" (June 2007), p. 22, available at http://www.taxfoundation.org/news/show/22457.html.

2. Lucy Dadayan, Nino Giguashvili, and Robert B. Ward, Rockefeller Institute Fiscal Features, "From a Bonanza to a Blue Chip? Gambling Revenue to the States," June 19, 2008, pp. 9 -12.

3. Lottery Post, "Study finds wealthy counties get most benefit from Indiana Lottery profits," June 11, 2009, available at http://www.lotterypost.com/news/195110.

4. Patricia A. McQueen, "Lotteries tap new game concepts to boost sales, interest," International Gaming and Wagering Business 29 no. 2, (Feb. 2008), p. 30 - 35.

Testimony to Vermont Blue Ribbon Tax Structure Commission: Options for Improving Vermonts Tax Competitiveness

Tue, 17 Nov 2009 00:00:00 EST

To the commissioners, thank you for this opportunity for the Tax Foundation to testify. My name is William Ahern, directory of policy and communications, and I'm joined by lottery expert Alicia Hansen.

I speak on behalf of the many economists who have, during my long tenure here, authored the annual editions of our two principal studies of state-local finances: our measurement of state-local tax burdens, and our State Business Tax Climate Index.

State-Local Tax Burdens in the Most Recent Year We've Measured, FY 2008
You have our Tax Foundation Special Report, No. 163, on state-local tax burdens in front of you, published in August 2008, with estimates of the tax burden in FY 2008 and selected prior years back to 1977. The burden for each state in each of those years is available on our website at taxfoundation.org.

By "state-local tax burden," we mean the percentage of all income earned that is taken by state-local taxes. Nationwide, our advance estimate of this fraction's numerator in FY 2008 was $4,283 per capita in taxes paid, and we pegged the denominator at $44,254 of income per capita. So the burden was 9.7% nationwide.

Vermonters' taxes were slightly higher, $4,410 per capita, while income earned was slightly lower, $42,626. Dividing taxes by income, we arrived at a state-local burden in Vermont of 10.3%. Seven states' residents had a higher burden. The 50 states appear in rank order in Table 1 on page 2 of the report.

This study's claim to fame is that we count non-resident payments in the state of the taxpayer, not the tax collector. This enables us to divide only residents' tax payments into the same residents' income. If non-resident payments were trivial, or all states garnered the same percentage of revenue from out of state, this difficult estimation of non-resident payments would be unnecessary. But nationwide, non-residents pay almost a third of state-local collections, and the variability is considerable (see Tables 6 and 7).

Vermont's State-Local Tax Burdens Over Time
Vermonters' tax burden has been dropping, from 10.9% in 2006 to 10.6% in 2007 to 10.3% in 2008 (See Tables 3 and 4). The ranking also fell from 4th to 6th to 8th over that 3-year period.

Revisions from Year to Year
By trying to estimate the state-local tax burden in the most recently completed fiscal year, we run into some predictable problems, which is to say the unpredictability of revenue flows. In 2007, our advance estimate of Vermonters' tax burden in FY 2007 tax burden was 14.1% which put you in the top spot. Some skeptics thought that exaggerated, and the Joint Fiscal Office (JFO) issued a mostly accurate rebuttal.

The principal reason for such a sizeable revision was property taxes, in two respects, one nationwide and one specific to Vermont and a few other states.

The reporting of property taxes lags further than any other tax source, and revenues had been falling faster than we forecast. However, that revision applied to all states, equally enough so that the burden estimates came down with rankings mostly unchanged.
As the JFO pointed out, and as the Maine policy community had been complaining for years, unlike other tax sources which we adjusted for non-residency, we had not been able to do so for property taxes. We simply did not have a nationwide dataset of non-resident property ownership and tax payment.
In 2008 we devised a proxy for non-resident property taxes, and the result was exactly what the JFO had predicted the year before and to which we had testified before your Ways and Means Committee in late 2007: states with the most vacation homes dropped in the ranking. Maine, Vermont and Wisconsin dropped the most.

In summary, Vermonters have a high tax burden by any measure, and for its citizens to be happy about that, they need to believe that their government services are superior, which they may be. Our study makes no attempt to judge which states' citizens are getting the best bang for their tax dollars, and we refer to the highest-taxed states as the "highest," not the "worst" for that reason.

Many legislators, however, are taking Table 6 to be the report's most important finding, concluding wrongly that whichever state has arranged its tax system to maximize non-resident collections is the winner. From our perspective, that's an unfortunate conclusion since it leads to exorbitant taxes on rental cars, lodging, local sales tax rates in college towns and resorts, and businesses generally, none of which meets any tax reformer's definition of sound tax policy.

State Business Tax Climate Index, FY 2010
The Index could be called our guide to re-arranging tax systems. Or it could be called a declaration of war against the nation's economic development specialists and the three-legged-stool crowd.

It pays almost no attention to collections and focuses instead on statutes. How high is the rate? How many brackets? How many credits, exemptions and deductions? In each of the 5 tax areas measured—corporate income, personal income, sales, unemployment insurance and property—we want the answers to reflect the classic mantra of all tax reformers: broad base and low rate.

We punish sales tax exemptions for gasoline or groceries, no matter how popular those may be with leaders of both parties. Nor do we want to see a flurry of corporate tax credits, and among those, we consider that the more targeted they are, the worse. Our pet peeve of the moment is film tax credits, which may take the cake for worst tax investment possible from the perspective of state revenue.

We observe that states are much more reluctant to enact politically motivated deductions, exemptions and credits if they don't have other every other tax handy to make up the revenue. So the absence of a major tax is a plus for a state tax system. We observe that it saves a considerable amount on tax enforcement to concentrate tax collection activities, and in those remaining taxes, it enforces a discipline that preserves the integrity of the tax base.

And we see no evidence to support the standard critique heard from tax collectors on this point, the virtue of a "three-legged stool," that is, an approximately equal reliance on income, sales and property tax revenue. On the contrary, the 12 states that do without a major tax do not experience more revenue volatility or budget problems than states that levy every tax in the arsenal.

As for the economic development specialists, they are urging an aggressive giveaway campaign in response to the economic downturn, believing that the only way to grow business in state is to bribe them to move in or expand. We believe just the opposite. A state that grants huge tax concessions to prospective businesses is administering a sharp slap in the face to every resident business and usually for little or no payoff. The Kelo and Dell fiascoes in Connecticut and North Carolina are only the best known.

We are aware that multi-state businesses have gotten quite good at playing the states and counties off against each other, but to coin a phrase, just say no. If your statutory tax rates are reasonably low, which you'll be able to achieve if the state legislature doesn't carve up your tax base as gifts for powerful constituencies, resident firms and prospective new arrivals will know that the playing field is level. That confidence is worth a lot. I'm not saying a state should never promise a highway exit or sewerage provisioning for a big incoming firm. I'm just saying that when you pave the road to Vermont with corporate and property tax credits, you treat your existing taxpayers with disrespect.

Vermont ranks 41st in the Index, worse than all but 9 states. Luckily, in a sense, one of those states is New York, so there is some incentive for upstate NY businesses to look across the border and consider Vermont's tax system as an improvement, hopefully more of one after your recommendations are signed into law. Massachusetts ranked 36th best, and New Hampshire ranked 7th best.

Two years ago I suggested to the Ways and Means Committee that Vermont could dispense with its general sales tax, and I repeat that suggestion now. Your sales tax collections are fairly low, and such a radical change would make news, which is exactly what you want to do. If enacted on a revenue neutral basis, some of the recently enacted tax preferences in your income taxes would have to go.

Progressivity
I suggest repealing your general sales tax in part because the Oregon/Delaware/Montana model of total reliance on income and property taxes should appeal to the Vermont electorate.

In many cases, the argument that sales taxes are regressive has been grossly exaggerated. (Prof. Crain at George Mason University has published some convincing analysis on this point.) But replacing sales tax revenue with income tax revenue would almost certainly increase progressivity to some extent.

The Index does indeed treat Vermont's tax system harshly, but the absence of a sales tax would outweigh any hikes you enact along with the repeal, and your ranking would probably rise from 41st to something around 20th. Oregon ranks 14th best.

Conclusion
Vermonters' tax burden is comparatively high, and the state tax code is comparatively inhospitable to business activity. Those are the basic conclusions of our burden study and the Index.

To what extent do those conclusions agree with official in-state analysis? From Volume 1 of the JFO's 2 volumes on tax reform, we would like to single out the description of tax neutrality on page 13. We endorse every word of that passage and urge lawmakers to repeal some of the targeted credits, deductions, exemptions and special rates, leading as they do to a combination of high statutory rates with low collections.

The JFO's Volume 2 seems designed to prove that even a heavy tax burden is okay if it's mostly shouldered by higher-income people. However, our Index doesn't find Vermont ranking particularly well on some of the taxes known to hit the poor hardest. For example:

Most regressive is your cigarette tax, $2.24 per pack, 7th highest;
Your beer tax is 26.5 cents, 18th highest;
Your modest gas tax is 20 cents, 39^th highest;
Your lottery taxes are high, which you'll hear more about from Ms. Hansen in a moment; and
Your sales tax rate is 6%, tied for 13th highest with 10 other states;

You're already comparatively hard on high incomes with a top rate on wages of 9.4%, sixth highest nationwide, but you're hard on the middle and upper-middle too: your 7% rate on income between $34K and $82K is exceeded throughout that income range in only six states, and in two other states in part of the range. Three other states levy the same 7% rate in that middle-income range.

The residents of New York, New Jersey and a few other states will probably continue edging out Vermonters in the burden and Index rankings, but whether they do or not, Vermont's legislators would be well-advised to take bold action. Getting out of the bottom 10 is too modest a goal when it's possible to leapfrog a couple dozen states. There is only so much you can extract from non-residents, and there is only so much of a tax disparity between Vermont and other states that employers and other mobile taxpayers will tolerate in the long run.

I'll close with a repetition of my warning to ignore the siren call of economic development experts. They will urge you to keep statutory rates high so that the exemption packages they offer to prospective firms will be more tempting. That's just a stick in the eye to your loyal employers in state who need a rate cut and will be galled by the sight of a red carpet being rolled out for newcomers.

Comparing Financing of the House and Senate Health Care Reform Plans

Fri, 30 Oct 2009 00:00:00 EDT

Fiscal Fact No. 200

Speaker Nancy Pelosi released a new version of the House health care reform bill, H.R. 3962, on the morning of Thursday, October 29, 2009. That afternoon, the Congressional Budget Office (CBO) put the total cost at $1.055 trillion.[1] By comparison, CBO has scored Senate Finance Committee Chairman Max Baucus's plan at $829 billion.

Here we compare the financing provisions of the two health care plans; there are similarities and major differences. Both bills would impose a financial penalty on individuals if they do not buy health insurance, although the House penalty is higher. In both plans, employers would have to pay a penalty to either the government or to new "health exchanges" if they do not provide a government-approved health insurance plan to employees, and once again, the penalty is larger in the House bill.

Also, both health care plans are financed by large net cuts to the Medicare program, mostly by lowering what the federal government is willing to pay doctors, hospitals and other health providers. Economists expect such Medicare cuts to be felt by both the health care industry and patients covered by Medicare.

Each plan has one large new tax, but those are quite different. Sen. Baucus's bill raises substantial revenue with a 40-percent excise tax on the value of so-called Cadillac health insurance plans. Democrats in the House shun the "Cadillac tax," agreeing with labor unions who have often bargained for the most expensive health insurance coverage. Instead, they propose a surtax on high-income tax returns. Single filers earning over $500,000 in adjusted gross income (AGI) and couples earning over $1 million would pay 5.4 percent of any additional dollar of income.[2] That surtax would be on top of the scheduled tax rate hike on the ordinary income of high-income taxpayers that is set to take effect in 2011 (top rate moves from 35 percent to 39.6 percent).

Table 1 and the pie charts below compare the sources of financing for the two plans. The Baucus bill includes $378 billion in Medicare cuts over the 10-year window (2010-2019), while the Pelosi bill's cuts to Medicare would be nearly $100 billion greater. Sen. Baucus's proposed tax on expensive health insurance plans would raise approximately $201.4 billion according to CBO, while the House surtax on high-income tax returns would raise more than double that: $460.5 billion.

With lower penalties on individuals and companies, and a new tax that raises less, how does Senator Baucus's bill make up the difference? First, it is nearly $200 billion "cheaper" than the Pelosi bill. That is, its total cost is estimated to be lower than the $900 billion ceiling that President Obama requested. Fees on the health care sector also make up some of the difference. For example, Sen. Baucus is proposing $38.6 billion in annual fees on manufacturers and importers of certain medical devices, along with $60.4 billion in fees imposed on health insurance providers. Finally, Sen. Baucus's proposal, unlike Speaker Pelosi's plan, would raise the AGI threshold for deducting medical expenses from 7.5 percent to 10 percent.

Table 1 Costs and Financing of Baucus and Pelosi Health Reform Bills
Category	Pelosi Bill (in billions)	Baucus Bill (in billions)
Total new spending on expanding health insurance coverage	$1,055	$829
Total deficit reduction	$104	$81
Net increases in non-Medicare health care spending (if positive)	$47.20	$0
Amount that needs to be financed	$1,206.20	$910
Surtax on high-income individuals	$460.50	$0
Excise tax on "Cadillac" health plans	$0	$201.40
Payments by employers to exchanges and for "pay or play"	$135	$23
Penalty for uninsured individuals	$33	$4
Tax on medical devices and other health care revenue increases	$55	$179.10
Corporate income tax increases and other non-health revenues	$50.40	$100.10
Net cuts to Medicare	$472.80	$377.80
Net cuts to other health care spending (if positive)	$0	$26.30
Amount financed	$1,206.70	$911.70
Source: Tax Foundation calculations based upon CBO/JCT scores. Totals do not add due to rounding.

[1] Letter to the Honorable Charles Rangel, Chairman, Ways and Means Committee, from Douglas Elmendorf, Director, Congressional Budget Office, dated October 29, 2009. See http://www.cbo.gov/ftpdocs/106xx/doc10688/hr3962Rangel.pdf

[2] The surtax would apply not only to regular "taxable income" but to "modified adjusted gross income" which includes capital gains, dividends and other types of income that are not taxed by the regular income tax rates.

The pie charts in this report can be downloaded for posting on other websites or blogs. A PDF, GIF and JPG are available at http://www.taxfoundation.org/taxdata/show/25457.html.

A PDF of the entire report is available at the bottom of this page.

Where Do State and Local Governments Concentrate Their Spending?

Thu, 29 Oct 2009 00:00:00 EDT

Fiscal Fact No. 199

Newly released Census data highlight the different spending priorities of state and local governments. By presenting the data here as percentages of total spending, we reveal government priorities whether their combined state and local budgets are comparatively large or small.

Spending is shown for nine specific functional categories and a miscellaneous catch-all: K-12 Education, Higher Education, Public Welfare, Hospitals and Health, Transportation, Public Safety, Environment and Housing, Government Administration, Interest on Debt, and Other.

Tables 1-9 below are "top ten" tables, showing the 10 states that devote the largest share of their total spending to each of these categories. The percentages for all 50 states and the District of Columbia are presented in Table 10. The tables are compiled using the most recent state and local finance data from the Census Bureau for fiscal year 2007 (July 1, 2006 through June 30, 2007 in most states).

Combined state-local data is best for interstate comparison because what some states accomplish with local spending is accomplished in other states with state-level programs.

Table 1 Which Ten States Concentrate Their Spending on K-12 Education?
State	Percentage of Total Spending
New Jersey	31.8%
New Hampshire	28.6%
Texas	28.0%
Connecticut	27.7%
Michigan	27.2%
Virginia	26.9%
Georgia	26.8%
Arkansas	26.0%
Vermont	25.2%
Maryland	25.2%
US average	23.9%
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 Concentrate Their Spending on Higher Education?
State	Percentage of Total Spending
Utah	15.5%
North Dakota	15.4%
North Carolina	14.2%
Vermont	13.7%
Iowa	13.2%
Alabama	13.2%
Kansas	13.0%
Oklahoma	12.6%
Arkansas	12.3%
New Mexico	12.2%
US average	9.1%
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 Concentrate Their Spending on Public Welfare?
State	Percentage of Total Spending
Maine	24.3%
Rhode Island	23.7%
Minnesota	22.8%
Vermont	22.7%
Pennsylvania	21.7%
Massachusetts	21.7%
New York	21.6%
Arkansas	21.4%
Kentucky	21.2%
Tennessee	20.8%
US average	16.8%
Note: Medicaid spending split between Public Welfare and Health & Hospitals. 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 Ten States Concentrate Their Spending on Health and Hospitals?
State	Percentage of Total Spending
South Carolina	15.9%
Wyoming	15.2%
Alabama	14.7%
Mississippi	13.6%
North Carolina	12.9%
Tennessee	12.2%
Iowa	12.1%
Washington	11.6%
Georgia	10.6%
Missouri	10.5%
US average	8.4%
Note: Medicaid spending split between Public Welfare and Health & Hospitals. 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 Which Ten States Concentrate Their Spending on Transportation?
State	Percentage of Total Spending
South Dakota	15.8%
Alaska	15.6%
North Dakota	14.2%
Montana	12.2%
Nevada	12.2%
Georgia	11.5%
Wyoming	10.8%
Idaho	9.7%
Kentucky	9.6%
Washington	9.5%
US average	7.6%
Source: Tax Foundation calculations based on data from Census Bureau's government finance data for state and local governments during fiscal year 2007.

Table 6 Which Ten States Concentrate Their Spending on Public Safety?
State	Percentage of Total Spending
Nevada	13.6%
Arizona	12.2%
California	12.0%
Florida	11.2%
Maryland	10.5%
Oregon	10.4%
Colorado	10.0%
Rhode Island	9.8%
Virginia	9.7%
Illinois	9.0%
US average	9.1%
Source: Tax Foundation calculations based on data from Census Bureau's government finance data for state and local governments during fiscal year 2007.

Table 7 Which Ten States Concentrate Their Spending on Environment/Housing?
State	Percentage of Total Spending
Louisiana	15.1%
Florida	11.1%
Washington	9.7%
Hawaii	9.6%
South Dakota	9.3%
California	9.3%
Oregon	9.1%
Arizona	9.1%
Colorado	9.0%
Maryland	8.9%
US average	7.7%
Source: Tax Foundation calculations based on data from Census Bureau's government finance data for state and local governments during fiscal year 2007.

Table 8 Which Ten States Concentrate Their Spending on Government Administration?
State	Percentage of Total Spending
Delaware	8.6%
Nevada	7.8%
Utah	7.8%
Montana	7.4%
Alaska	7.1%
West Virginia	7.0%
Rhode Island	6.9%
Colorado	6.9%
California	6.7%
Oregon	6.6%
US average	5.3%
Source: Tax Foundation calculations based on data from Census Bureau's government finance data for state and local governments during fiscal year 2007.

Table 9 Which Ten States Concentrate Their Spending on Interest on Their Debt?
State	Percentage of Total Spending
Massachusetts	7.4%
Hawaii	5.6%
New Hampshire	5.5%
Rhode Island	5.3%
Illinois	5.3%
Texas	5.1%
Connecticut	5.1%
Colorado	5.1%
Kentucky	4.9%
Pennsylvania	4.9%
US average	4.1%
Source: Tax Foundation calculations based on data from Census Bureau's government finance data for state and local governments during fiscal year 2007.

Table 10 State-Local Spending by Category, by State Percentage of Total Spending in Fiscal Year 2007
State	K-12 Educ.	Higher Educ.	Public Welfare	Hospitals & Health	Transp.	Public Safety	Envir./ Housing	Govt. Admin.	Debt Interest	Other
U.S.	23.90%	9.10%	16.80%	8.40%	7.60%	9.10%	7.70%	5.30%	4.10%	7.90%
Ala.	23.40%	13.20%	15.40%	14.70%	7.60%	7.70%	5.10%	4.40%	3.10%	5.30%
Alaska	18.50%	6.10%	13.80%	3.60%	15.60%	6.20%	7.90%	7.10%	4.30%	17.00%
Ariz.	21.70%	10.00%	16.70%	6.90%	8.40%	12.20%	9.10%	6.10%	3.50%	5.40%
Ark.	26.00%	12.30%	21.40%	6.90%	7.40%	7.20%	5.60%	5.20%	2.70%	5.20%
Calif.	21.80%	8.60%	14.60%	9.30%	5.80%	12.00%	9.30%	6.70%	4.10%	7.80%
Colo.	22.90%	10.60%	11.20%	8.40%	8.50%	10.00%	9.00%	6.90%	5.10%	7.50%
Conn.	27.70%	7.30%	16.20%	6.70%	4.50%	7.50%	6.20%	5.80%	5.10%	13.00%
Del.	21.70%	11.20%	17.00%	5.50%	7.00%	8.90%	8.20%	8.60%	4.10%	7.80%
Fla.	22.60%	6.30%	14.00%	8.20%	9.30%	11.20%	11.10%	6.10%	3.50%	7.70%
Ga.	26.80%	7.60%	14.60%	10.60%	11.50%	8.70%	7.10%	5.00%	2.10%	6.00%
Hawaii	20.00%	9.50%	13.90%	9.80%	7.60%	6.30%	9.60%	6.10%	5.60%	11.50%
Idaho	21.60%	10.50%	16.90%	10.00%	9.70%	8.90%	8.10%	6.30%	2.40%	5.70%
Ill.	23.90%	8.50%	15.80%	5.60%	9.10%	9.00%	7.90%	5.00%	5.30%	10.00%
Ind.	24.00%	11.00%	16.80%	8.80%	6.80%	6.70%	6.20%	4.60%	4.10%	10.90%
Iowa	23.00%	13.20%	16.60%	12.10%	9.30%	6.10%	5.40%	4.20%	3.00%	7.10%
Kans.	24.20%	13.00%	16.00%	6.90%	9.30%	7.40%	5.30%	5.00%	4.40%	8.60%
Ky.	22.10%	11.20%	21.20%	7.70%	9.60%	6.70%	5.30%	4.60%	4.90%	6.70%
La.	19.20%	7.90%	14.00%	10.10%	7.70%	8.40%	15.10%	5.20%	4.10%	8.20%
Maine	22.00%	7.60%	24.30%	6.10%	8.00%	6.20%	7.30%	5.10%	3.50%	9.90%
Md.	25.20%	10.20%	16.40%	4.80%	7.70%	10.50%	8.90%	5.50%	3.60%	7.20%
Mass.	22.50%	6.90%	21.70%	4.40%	5.30%	8.10%	7.20%	4.70%	7.40%	11.70%
Mich.	27.20%	12.10%	15.60%	9.00%	6.30%	8.50%	6.50%	4.50%	4.20%	5.90%
Minn.	22.80%	9.00%	22.80%	6.40%	8.90%	6.90%	7.70%	4.90%	3.90%	6.60%
Miss.	18.60%	10.50%	18.20%	13.60%	9.10%	5.90%	4.60%	3.70%	2.10%	13.80%
Mo.	24.60%	9.10%	15.70%	10.50%	9.00%	8.00%	6.50%	4.60%	4.80%	7.20%
Mont.	21.80%	11.50%	12.80%	6.50%	12.20%	8.00%	8.40%	7.40%	3.60%	7.80%
Nebr.	24.60%	12.10%	16.50%	9.70%	9.00%	7.60%	6.60%	4.20%	2.20%	7.50%
Nev.	24.10%	8.10%	10.80%	7.30%	12.20%	13.60%	8.10%	7.80%	4.20%	3.80%
N.H.	28.60%	9.10%	17.50%	2.20%	8.80%	8.20%	6.60%	5.50%	5.50%	7.80%
N.J.	31.80%	6.40%	15.80%	4.80%	4.90%	8.70%	6.50%	4.60%	4.50%	11.90%
N.M.	20.20%	12.20%	20.00%	7.80%	8.80%	8.60%	6.20%	5.80%	3.10%	7.20%
N.Y.	23.60%	5.40%	21.60%	8.40%	5.80%	8.40%	6.90%	4.70%	4.70%	10.50%
N.C.	21.40%	14.20%	16.30%	12.90%	6.70%	8.20%	7.60%	3.90%	2.60%	6.10%
N.D.	21.00%	15.40%	15.70%	2.20%	14.20%	5.50%	7.80%	5.10%	4.40%	8.80%
Ohio	24.50%	8.90%	20.20%	8.30%	6.20%	7.70%	7.60%	5.90%	4.00%	6.80%
Okla.	24.10%	12.60%	19.40%	7.40%	8.80%	8.40%	5.70%	5.30%	2.90%	5.40%
Ore.	20.70%	11.40%	14.40%	8.30%	8.70%	10.40%	9.10%	6.60%	4.30%	6.00%
Pa.	24.60%	7.30%	21.70%	6.40%	8.30%	7.30%	6.50%	5.40%	4.90%	7.70%
R.I.	24.30%	6.60%	23.70%	2.80%	6.00%	9.80%	6.00%	6.90%	5.30%	8.60%
S.C.	24.30%	9.60%	17.20%	15.90%	5.30%	6.80%	5.40%	5.80%	3.80%	5.90%
S.D.	21.70%	9.50%	15.50%	4.60%	15.80%	7.10%	9.30%	5.80%	3.50%	7.20%
Tenn.	21.50%	8.50%	20.80%	12.20%	7.30%	8.60%	6.50%	4.80%	2.80%	7.00%
Tex.	28.00%	11.20%	13.70%	8.80%	9.30%	8.60%	5.80%	3.80%	5.10%	5.70%
Utah	21.20%	15.50%	13.00%	7.70%	8.10%	8.30%	8.50%	7.80%	3.00%	7.00%
Vt.	25.20%	13.70%	22.70%	3.20%	9.00%	6.00%	6.00%	4.60%	3.70%	6.00%
Va.	26.90%	11.30%	14.20%	8.00%	8.60%	9.70%	6.90%	5.40%	3.30%	5.50%
Wash.	20.70%	10.30%	14.10%	11.60%	9.50%	9.00%	9.70%	4.40%	4.10%	6.60%
W.Va.	23.20%	11.70%	20.10%	5.30%	9.40%	6.00%	6.30%	7.00%	2.80%	8.20%
Wis.	23.80%	12.00%	18.20%	6.70%	8.60%	8.90%	7.10%	4.30%	4.40%	6.10%
Wyo.	23.10%	9.00%	10.30%	15.20%	10.80%	7.50%	8.20%	6.50%	1.80%	7.60%
D.C.	16.80%	1.50%	25.50%	6.30%	1.20%	11.70%	16.00%	6.20%	4.40%	10.40%
Source: Tax Foundation calculations based on data from Census Bureau's government finance data for state and local governments during fiscal year 2007.

New Jersey and New York Counties Rank Highest in Property Tax, Louisiana Parishes Lowest

Wed, 28 Oct 2009 00:00:00 EDT

Fiscal Fact No. 198

Introduction

The highest median property taxes on owner-occupied homes are paid in counties in New York and New Jersey while the lowest taxes are found in Louisiana parishes, according to new data from the U.S. Census Bureau's American Community Survey (ACS).

The Census Bureau published new data on residential, owner-occupied property taxes along with other data on income and other demographic data. The new release covers all geographic types with populations of 20,000 or more, but our analysis is restricted to counties, tallying all the property tax levied in those counties, including those levied by school districts and any other entity with taxing authority.

To prevent small sample sizes in smaller counties from creating inaccurate impressions, Census presents this data only in three-year averages. To see data from just the most recent year, 2008, consult Tax Foundation Fiscal Fact, No. 192, published in September, which was based on Census data for counties with populations of 65,000 or more.

In What Counties Are Property Taxes Highest (2006-08)?

Tables 1-3 show which counties rank in the top 10 in property taxes on homeowners by three metrics: (1) median real estate taxes paid, (2) median real estate taxes as a percentage of median home value, and (3) median real estate taxes as a percentage of median homeowner income.

Table 1 Top Ten Counties for Median Real Estate Tax (Owner-Occupied) Three-Year Average of 2006-08 in Counties with Populations of 20,000 or more
County	Median Annual Tax Payment	Rank
Westchester County, New York	$ 8,404	1
Hunterdon County, New Jersey	$ 8,347	2
Nassau County, New York	$ 8,306	3
Bergen County, New Jersey	$ 7,997	4
Rockland County, New York	$ 7,798	5
Essex County, New Jersey	$ 7,676	6
Somerset County, New Jersey	$ 7,676	6
Morris County, New Jersey	$ 7,310	8
Passaic County, New Jersey	$ 7,095	9
Union County, New Jersey	$ 7,058	10
National median	$ 1,854	-
Source: U.S. Census Bureau and Tax Foundation

Table 2 Top Ten Counties for Median Real Estate Tax as a Percentage of Median Home Value (Owner-Occupied) Three-Year Average of 2006-08 in Counties with Populations of 20,000 or more
County	Median Real Estate Taxes Paid	Median Value Owner-Occupied Housing Units	Tax as Percentage of Home Value	Rank
Orleans County, New York	$ 2,506	$ 82,400	3.04%	1
Niagara County, New York	$ 2,799	$ 94,900	2.95%	2
Allegany County, New York	$ 1,867	$ 63,900	2.92%	3
Monroe County, New York	$ 3,644	$ 126,300	2.89%	4
Wayne County, New York	$ 2,996	$ 105,300	2.85%	5
Montgomery County, New York	$ 2,474	$ 89,900	2.75%	6
Genesee County, New York	$ 2,686	$ 98,400	2.73%	7
Cortland County, New York	$ 2,482	$ 91,700	2.71%	8
Chautauqua County, New York	$ 2,058	$ 77,400	2.66%	9
Seneca County, New York	$ 2,351	$ 88,800	2.65%	10
National median	$ 1,854	$ 192,400	0.96%	-
Source: U.S. Census Bureau and Tax Foundation

Table 3 Top Ten Counties for Median Real Estate Tax as a Percentage of Homeowner Income Three-Year Average of 2006-08 in Counties with Populations of 20,000 or more
County	Median Real Estate Taxes Paid	Median Household Income for Homeowners	Tax as Percentage of Income	Rank
Passaic County, New Jersey	$ 7,095	$ 85,088	8.34%	1
Essex County, New Jersey	$ 7,676	$ 94,519	8.12%	2
Nassau County, New York	$ 8,306	$ 103,831	8.00%	3
Bergen County, New Jersey	$ 7,997	$ 101,326	7.89%	4
Union County, New Jersey	$ 7,058	$ 90,456	7.80%	5
Rockland County, New York	$ 7,798	$ 102,409	7.61%	6
Westchester County, New York	$ 8,404	$ 111,243	7.55%	7
Hunterdon County, New Jersey	$ 8,347	$ 111,334	7.50%	8
Suffolk County, New York	$ 6,842	$ 94,446	7.24%	9
Hudson County, New Jersey	$ 6,155	$ 85,512	7.20%	10
National median	$ 1,854	$ 65,088	2.85%	-
Source: U.S. Census Bureau and Tax Foundation

In What Counties Are Property Taxes Lowest (2006-08)?

Tables 4, 5 and 6 show what counties rank at the bottom in property taxes on homeowners by the same three metrics in tables 1-3. All are Louisiana parishes (same as counties).

Table 4 Bottom Ten Counties for Median Real Estate Tax (Owner-Occupied) Three-Year Average of 2006-08 in Counties with Populations of 20,000 or More
County	Median Annual Tax Payment	Rank
De Soto Parish, Louisiana	$ 129	1,813
Evangeline Parish, Louisiana	$ 127	1,814
Jefferson Davis Parish, Louisiana	$ 127	1,814
Webster Parish, Louisiana	$ 125	1,816
Sabine Parish, Louisiana	$ 124	1,817
Richland Parish, Louisiana	$ 122	1,818
Avoyelles Parish, Louisiana	$ 120	1,819
Vernon Parish, Louisiana	$ 120	1,819
Allen Parish, Louisiana	$ 119	1,821
Franklin Parish, Louisiana	$ 117	1,822
National median	$ 1,854	-
Source: U.S. Census Bureau and Tax Foundation

Table 5 Bottom Ten Counties for Median Real Estate Tax as a Percentage of Median Home Value (Owner-Occupied) Three-Year Average of 2006-08 in Counties with Populations of 20,000 or more
County	Median Real Estate Taxes Paid	Median Value Owner-Occupied Housing Units	Tax as Percentage of Home Value	Rank
Livingston Parish, Louisiana	$ 198	$ 136,000	0.15%	1813
Terrebonne Parish, Louisiana	$ 165	$ 114,100	0.14%	1814
Avoyelles Parish, Louisiana	$ 120	$ 83,100	0.14%	1815
West Baton Rouge Parish, Louisiana	$ 176	$ 122,900	0.14%	1816
Assumption Parish, Louisiana	$ 130	$ 90,800	0.14%	1817
St. James Parish, Louisiana	$ 160	$ 112,500	0.14%	1818
Lafourche Parish, Louisiana	$ 152	$ 107,800	0.14%	1819
Tangipahoa Parish, Louisiana	$ 168	$ 137,700	0.12%	1820
St. John the Baptist Parish, Louisiana	$ 163	$ 143,100	0.11%	1821
St. Bernard Parish, Louisiana	$ 145	$ 135,000	0.11%	1822
National median	$ 1,854	$ 192,400	0.96%	-
Source: U.S. Census Bureau and Tax Foundation

Table 6 Bottom Ten Counties for Median Real Estate Tax as a Percentage of Homeowner Income Three-Year Average of 2006-08 in Counties with Populations of 20,000 or more
County	Median Real Estate Taxes Paid	Median Household Income for Homeowners	Tax as Percentage of Income	Rank
Lafourche Parish, Louisiana	$ 152	$ 53,846	0.28%	1813
St. John the Baptist Parish, Louisiana	$ 163	$ 57,799	0.28%	1814
De Soto Parish, Louisiana	$ 129	$ 45,888	0.28%	1815
Jefferson Davis Parish, Louisiana	$ 127	$ 45,717	0.28%	1816
Webster Parish, Louisiana	$ 125	$ 45,948	0.27%	1817
Beauregard Parish, Louisiana	$ 132	$ 49,241	0.27%	1818
Evangeline Parish, Louisiana	$ 127	$ 48,692	0.26%	1819
Allen Parish, Louisiana	$ 119	$ 45,851	0.26%	1820
Vermilion Parish, Louisiana	$ 138	$ 53,842	0.26%	1821
Vernon Parish, Louisiana	$ 120	$ 47,085	0.25%	1822
National median	$ 1,854	$ 65,088	2.85%	-
Source: U.S. Census Bureau and Tax Foundation

Can Income Tax Hikes Close the Deficit?

Thu, 22 Oct 2009 00:00:00 EDT

Fiscal Fact No. 197

For all but three years of the past 40, the federal government has run a deficit, and at the most basic level, the reason is simple. In their desire to be re-elected, congressmen are afraid not to spend more and more, and they're equally afraid to give voters the bill for those services, even though that bill must inevitably be paid.

During the fiscal year that's just beginning, fiscal year 2010, the federal government plans to spend $3.8 trillion dollars, the largest annual expenditure ever. On the revenue side, taxes will bring in about $2.3 trillion, so the federal government is creating a shortfall of approximately $1.5 trillion. That projected deficit will vary as the months pass, but it may well end up being even higher than the record-setting deficit in 2009 of $1.4 trillion. Those huge amounts translate into a federal government that will spend $33,000 on each household but that will raise only $19,000.

Although President Obama and the Congress do plan to raise taxes, which will cut into the deficit, they also have new spending plans, leaving the budget with historically huge deficits throughout the next decade. Those deficits will be financed by selling U.S. Treasury bonds to people all over the world and paying them back with interest in years to come. But instead of borrowing, could a congress willing to bring taxpayers the full bill for this year's spending erase the deficit by raising taxes this year?

Using the Tax Foundation's Microsimulation Model, we can project how much revenue a broad-based increase in federal income tax rates would generate. However, when the rates necessary are spelled out, it becomes apparent that deficits this large simply cannot be closed with higher federal income tax rates. This year and for several years to come, even if congressmen were willing to present the full bill to the taxpayers in the form of higher taxes to match their spending level, they could not do so.

About 40 percent of the federal government's revenue comes from payroll taxes at a rate of 15.3 percent of wages. After taking that chunk from the nation's paychecks, the federal government turns to the individual income tax for most of the rest. And the income tax is always the principal lever that Congress uses whenever it wants to adjust taxes up or down.

Assuming deductions, exemptions and credits were kept the same as they are now, the government would have to nearly triple every tax rate. Table 1 shows the effect on statutory rates of such a hypothetical tax hike. Instead of taxing couples with rates that range from 10 percent to 35 percent, tax rates would have to start at 27.2 percent and range up to 95.2 percent.

Table 1 Federal Individual Income Tax Rates for Joint Tax Returns Current Law Versus Rates Necessary to Erase Deficit 2010
Tax Brackets for Couples Filing Joint Returns	Current Law Tax Rates	Rates Needed to Close Deficit
0 to $16,750	10%	27.2%
$16,751 to $68,000	15%	40.8%
$68,001 to $137,300	25%	68.0%
$137,301 to $209,200	28%	76.2%
$209,201 to $373,600	33%	89.8%
$373,601 and over	35%	95.2%
Note: The rates are the same for single taxpayers, but the brackets vary. For the bottom three brackets, the threshold amounts are exactly one-half what they are for couples. For the top bracket, the threshold is the same for singles as for couples. Brackets are shown for 2009; inflation adjustment for 2010 will be announced in the summer of 2010. Source: IRS and Tax Foundation

Table 2 shows the effect on average tax payments, which would also rise precipitously, though not by exactly the same percentage as the tax rates.[1] Next year, the average tax return filed will be subject to a $7,169 tax bill. But if we wanted to close the deficit, the average tax bill would have to climb to $19,001. Low-income filers with adjusted gross incomes (AGIs) between $0 and $20,000 would see their tax burdens climb from $130 to $372; middle-income filers earning between $75,000 and $100,000 would see their $7,055 payments jump to $20,515; while taxpayers with AGIs over $1 million would see their tax bills climb from about $800,000 to almost $2 million.

Table 2 Estimated Average Federal Income Tax Payments Current Law Payments Compared to Payments Necessary to Erase Deficit 2010
Income Ranges	Average Payments Under Current Law	Average Payments Necessary to Close Deficit
All Returns	$ 7,169	$ 19,001
No AGI	$ 155	$ 444
$1 - $20,000	$ 130	$ 372
$20,000 - $25,000	$ 667	$ 1,963
$25,000 - $30,000	$ 1,091	$ 3,217
$30,000 - $40,000	$ 1,702	$ 5,010
$40,000 - $50,000	$ 2,525	$ 7,507
$50,000 - $75,000	$ 4,208	$ 12,537
$75,000 - $100,000	$ 7,055	$ 20,515
$100,000 - $200,000	$ 15,502	$ 42,641
$200,000 - $500,000	$ 55,740	$ 139,392
$500,000 - $1,000,000	$ 172,143	$ 431,427
$1,000,000 and Over	$ 793,842	$ 1,964,052
Source: Tax Foundation microsimulation model

This analysis assumes that individuals would not change their income-earning or tax-planning behavior in response to higher tax rates. That is, they would earn the same amounts as they would with current tax rates, and they would fill out their tax returns in the same way they do now. But of course they would alter their behavior. With high-income people paying a federal tax rate over 90 percent, and most states adding on about 8 percent, plus local income taxes and payroll taxes, tax rates would be over 100 percent for many households. In other words, beyond some point government would be taxing away all earnings and there would be no incentive to work.

Are 2009 and 2010 an Anomaly?
The federal deficit is projected to be larger in 2009 and 2010 than in any future year, and it could be argued that the impossibility of raising enough revenue now to match federal spending is not so alarming because those two years are an anomaly caused partly by the TARP bailout and the fiscal stimulus legislation. Those two federal actions account for roughly one quarter of 2009's $1.4 trillion deficit, according to Secretary Geithner.[2]

However, in subsequent years, according to the President's Budget, the deficits are still huge by historical standards, never falling below $700 billion and rising back above $1 trillion as 2020 nears. As a result, in all likelihood it is true for every foreseeable year that the income tax system would be unable to raise as much revenue as the government plans to spend, absent major changes in our tax code or spending patterns.

In 2011 tax rates would have to be increased by a factor of 2.23 to close the deficit, and even in 2012 and 2013, when projected deficits are the lowest, according to the Administration, tax rates would have to be levied at prohibitively high levels to erase the deficit. For example, in 2012, even after the top two tax rates have been raised from 33% to 36% and from 35% to 39.6%, all the rates would have to be multiplied by 1.87 to raise enough to erase the deficit (see Table 3).

Table 3 Federal Individual Income Tax Rates Current Law Versus Rates Necessary to Erase Deficit 2012
Tax Brackets for Couples Filing Joint Returns	Current Law Tax Rates	Rates Needed to Close Deficit
$0 to $17,150	10%	18.7%
$17,151 to $69,600	15%	28.1%
$69,601 to $140,500	25%	46.8%
$140,501 to $214,100	28%	52.4%
$214,101 to $382,300	36%	67.3%
$382,301 and over	39.6%	74.1%
Source: Internal Revenue Service and Tax Foundation

Average tax payments would rise precipitously in 2012 if that were the year targeted for eradicating the deficit, though not as steeply as in 2010.

Table 4 shows the effect on average tax payments in 2012 if Congress decided to close the deficit that year. Low-income filers (AGI between $0 and $20,000) would pay $248 instead of $129; middle-income filers (AGI between $75,000 and $100,000) would pay about $13,700 instead of $7,000; and the highest-earning filers (AGIs over $1 million) would pay about $1,650,000 instead of $935,000.

Table 4 Estimated Average Federal Income Tax Payments Current Law Payments Compared to Payments Necessary to Erase Deficit 2012
Income Ranges	Average Payments Under Current Law	Average Payments Necessary to Close Deficit
All Returns	$ 8,831	$ 16,178
No AGI	$ 151	$ 292
$1 - $20,000	$ 129	$ 248
$20,000 - $25,000	$ 660	$ 1,289
$25,000 - $30,000	$ 1,006	$ 1,986
$30,000 - $40,000	$ 1,670	$ 3,280
$40,000 - $50,000	$ 2,488	$ 4,904
$50,000 - $75,000	$ 4,162	$ 8,265
$75,000 - $100,000	$ 6,992	$ 13,708
$100,000 - $200,000	$ 15,757	$ 29,609
$200,000 - $500,000	$ 57,692	$ 103,074
$500,000 - $1,000,000	$ 195,687	$ 347,765
$1,000,000 and over	$ 935,425	$ 1,644,460
Source: Tax Foundation microsimulation model

While much debate rages over the effect of modest tax rate changes—do they persuade workers to work less and entrepreneurs to risk less?—there can be little doubt that the high tax rates necessary to balance the budget in any of the next several years would discourage all manner of income-producing endeavors. Consequently, even when the deficit is projected to be as "low" as it is in 2012 and 2013, it is probably not possible to close the deficit with personal income tax hikes.

[1] Raising the statutory tax rates would proportionately raise the value of deductions, but fixed-dollar credits and exemptions would be comparatively less valuable. Therefore, each income group's average tax payment under the hypothetically high tax rates rises by a slightly different percentage, depending on which credits and exemptions are used the most at each income level.

[2] Jackie Calmes, "$1.4 Trillion Deficit Complicates Stimulus Plans," New York Times, October 16, 2009, at http://www.nytimes.com/2009/10/17/us/17deficit.html?hp

Taxes, Competitiveness and the New Hampshire Business Climate (Testimony before the New Hampshire Legislature)

Wed, 21 Oct 2009 00:00:00 EDT

This testimony was provided by Tax Foundation President Scott Hodge. Click here to listen to the testimony, or download the PDF or PowerPoint presentation below.

Updated State and Local Option Sales Tax

Fri, 16 Oct 2009 00:00:00 EDT

Fiscal Fact No. 196

Introduction

Sales taxes are paradoxically transparent and non-transparent. A taxpayer can easily see how high the tax is by looking at the receipt for any purchase. It's hard to imagine a more transparent tax.

(Click map to view larger.)

However, due to the wide variety of local option sales taxes among municipalities, a taxpayer can be puzzled by the many different tax rates his receipts show in various parts of the state.

Making use of newly available data sources, we are now able to update information on average local sales taxes more regularly. Table 1 and the accompanying map show current state sales taxes, average local sales taxes, and the combined rate and state rank.

Table 1 State and Local Sales Tax Rates As of September 29, 2009
	State Rate	Average Local Rate¹	Combined	Rank of Combined Rate
Alabama	4.00%	2.15%	6.15%	31
Alaska	none	1.13%	1.13%	46
Arizona	5.60%	2.32%	7.92%	9
Arkansas	6.00%	1.79%	7.79%	10
California²	8.25%	0.81%	9.06%	2
Colorado	2.90%	4.34%	7.24%	13
Connecticut	6.00%	none	6.00%	32
Delaware	none	none	none	47
Florida	6.00%	1.01%	7.01%	18
Georgia	4.00%	3.02%	7.02%	17
Hawaii	4.00%	0.38%	4.38%	45
Idaho	6.00%	none	6.00%	32
Illinois	6.25%	2.15%	8.40%	6
Indiana	7.00%	none	7.00%	19
Iowa	6.00%	0.94%	6.94%	24
Kansas	5.30%	1.65%	6.95%	23
Kentucky	6.00%	none	6.00%	32
Louisiana	4.00%	4.43%	8.43%	5
Maine	5.00%	none	5.00%	43
Maryland	6.00%	none	6.00%	32
Massachusetts	6.25%	none	6.25%	29
Michigan	6.00%	none	6.00%	32
Minnesota	6.88%	0.34%	7.22%	14
Mississippi	7.00%	none	7.00%	19
Missouri	4.23%	2.95%	7.18%	15
Montana	none	none	none	47
Nebraska	5.50%	1.01%	6.51%	27
Nevada	6.85%	0.74%	7.59%	11
New Hampshire	none	none	none	47
New Jersey	7.00%	none	7.00%	19
New Mexico	5.00%	1.40%	6.40%	28
New York	4.00%	4.30%	8.30%	7
North Carolina	5.75%	2.32%	8.07%	8
North Dakota	5.00%	1.00%	6.00%	32
Ohio	5.50%	1.33%	6.83%	25
Oklahoma	4.50%	3.94%	8.44%	4
Oregon	none	none	none	47
Pennsylvania	6.00%	0.22%	6.22%	30
Rhode Island	7.00%	none	7.00%	19
South Carolina	6.00%	1.04%	7.04%	16
South Dakota	4.00%	1.52%	5.52%	40
Tennessee	7.00%	2.41%	9.41%	1
Texas	6.25%	1.14%	7.39%	12
Utah³	5.95%	0.66%	6.61%	26
Vermont	6.00%	none	6.00%	32
Virginia4	5.00%	none	5.00%	43
Washington	6.50%	2.28%	8.78%	3
West Virginia	6.00%	none	6.00%	32
Wisconsin	5.00%	0.42%	5.42%	41
Wyoming	4.00%	1.38%	5.38%	42
District of Columbia	6.00%	n/a%	6.00%	n/a
Source: Sales Tax Clearinghouse; Census Bureau; Departments of Revenue.

Combined Rates
There are five states that do without a general statewide sales tax: Alaska, Delaware, Montana, New Hampshire and Oregon. Alaska is the only state on this list that allows municipalities to charge a local sales tax, and these can be quite high in some cases. For example, Juneau, the capital, has a city sales tax rate of 5 percent.

Delaware, Montana, New Hampshire and Oregon rank lowest with no state or local sales taxes. Alaska comes next with a combined local and state rate of 1.61 percent, followed by Hawaii (4.38 percent), Maine (5 percent), Virginia (5 percent), Wisconsin (5.42 percent) and Wyoming (5.42 percent). The states with highest combined state-local rates are Tennessee (9.41 percent), California (9.06 percent), Washington (8.78 percent), Oklahoma (8.44 percent) and Louisiana (8.43 percent).

The dubious distinction of having the highest combined sales tax goes to four localities in central Alabama. Brookwood, Coaling, Coker and Vance have a total sales tax of 11 percent. Individuals making purchases in any of these municipalities owe 4 percent to the State of Alabama, 5 percent to Tuscaloosa County, and finally 2 percent to the city.

State Rates
California has the highest statewide rate of 8.25 percent, including a mandatory 1 percent tax collected by the state but distributed to local governments. (Some sources describe California's statewide sales tax as one percentage point lower for this reason.) Six states tie for the second highest rate of 7 percent: Indiana, North Carolina, Mississippi, New Jersey, Rhode Island, and Tennessee.

The lowest non-zero rate goes to Colorado with a rate of 2.90 percent. There are seven states that are next in line with a 4 percent rate: Alabama, Georgia, Hawaii, Louisiana, New York, South Dakota, and Wyoming.

Local Rates
As one can see from the table, local rates can make up a large percentage of the overall sales rate. For example, in Colorado the local rate makes up 60 percent of the overall sales tax rate. In Alaska, the local rate is 100 percent of the total sales tax rate. 16 states have no local option general sales tax.

The states with the highest average local sales tax rates are Louisiana (4.43 percent), Colorado (4.34 percent), New York (4.30 percent), Oklahoma (3.94 percent) and Georgia (3.02 percent). The states with the lowest non-zero local rate are Pennsylvania (0.22 percent), Hawaii (0.34 percent), Minnesota (0.34 percent), Wisconsin (0.42 percent) and Utah (0.66 percent).

Methodology
This report compiles the widely available state sales tax rates from the Facts and Figures Mid-Year Update⁵ with local sales tax rate data for counties and cities. The city data are reported at the five-digit zip code level.

For example, the table below represents two zip codes in Louisiana that correspond to two different cities in Allen Parish: 70658 is Reeves, LA and 70638 is Elizabeth, LA. Louisiana has a state-wide rate of 4 percent and Allen Parish has a local rate of 4.7 percent. Reeves does not charge a city-level sales tax, but Elizabeth does have a rate of 1.3 percent. The total combined state and local rates for Reeves is 8.7 percent and Elizabeth is an even 10 percent.

Table 2 Example of Local Sales Tax Data by Zip Code
Zip	County⁶	State	County	City	State Rate	County Rate	City Rate
70658	03	LA	Allen	Reeves	0.04	0.047	0
70638	03	LA	Allen	Elizabeth	0.04	0.047	0.013
Source: Sales Tax Clearinghouse.

Since the rates are reported by zip code, and localities may contain all or part of many zip code areas, some inexactitude creeps in during the conversion from zip code to locality. There are at least 40,000 five-digit zip code areas overlapping the more than 8,000 localities in the U.S. We average the zip code rates within each locality. An improvement would be to weight those zip codes by volume of sales or personal income or population, but we are unable to do so for this study. Within each state, however, we average the local rates and weight them by personal income as reported by the Bureau of Economic Analysis within the Department of Commerce.

Notes

1. Average of all local rates, weighted by personal income.

2. California and Virginia both mandate and collect a 1 percent "local rate" that we list here as part of the state rate because localities do not have the authority to change it.

3. In Utah, the state mandates a 1.25 percent "local" add-on rate. Because localities do not have the authority to amend it, we list it here as part of the state rate.

4. California and Virginia both mandate and collect a 1 percent "local" add-on rate. Because localities do not have the authority to amend it, we list them here as part of the state rate.

5. http://www.taxfoundation.org/publications/show/2181.html.

6. Louisiana calls its counties parishes.

If Medicare Cuts Proposed in Baucus Plan Are To Be Believed, Long-Term Deficit Outlook Is Favorable

Thu, 15 Oct 2009 00:00:00 EDT

Over Twenty Years, Baucus Plan Is Deficit-Neutral Even Without Excise Tax on "Cadillac" Health Insurance Plans

Fiscal Fact No. 195

Introduction
Passage by the Finance Committee yesterday of Chairman Max Baucus's health care proposal came after a boost from the Congressional Budget Office, which analyzed the plan (along with JCT) and reported that it would be deficit-neutral over ten years with $81 billion to spare.

One feature of the CBO report is its estimate of "savings," i.e., cuts in current health spending, mostly Medicare. The cuts are far more substantial than some may have expected, and they might constitute a hurdle in themselves to future bills.

Cuts in Medicare and other health programs ratchet up quickly in the CBO score, reaching $93 billion in 2019 alone and totaling $404 billion between FY 2010 and 2019. Assuming those Medicare cuts continue growing at the same rate after 2019, they could reach a total of $1.8 trillion over the next ten-year period, 2020-2029.

In other words, if Congress were considering a 20-year budget window instead of ten years, Chairman Baucus's proposed excise tax on Cadillac health plans would not be necessary to pay for the plan. Even without those revenues, the spending cuts would probably be sufficient to cut the deficit. (The other smaller tax hikes and revenue raisers would remain.)

Near-Term Critique
Some critics question the validity of the deficit-neutral finding over the ten-year budget window. Their doubts center around the timing of Chairman Baucus's various provisions. His new taxes and spending cuts are scheduled to kick in years earlier than the new health benefits. And indeed, over the ten-year budget window that the CBO is obliged to use (FY 2010-2019), the three-year disparity between the onset of tax collections and spending cuts (immediate) and new health benefits (three-year delay) is a bit of an apples-to-oranges comparison and does improve the plan's score on the deficit.

However, as we explain here, if one compares apples to apples by scoring the Baucus plan over the subsequent ten-year period, between 2020 and 2029, the spending cuts in Medicare combined with the proposed tax hikes far exceed the cost of new health benefits for working-age people, improving the deficit dramatically. In short, if the Medicare cuts in the Baucus plan are politically sustainable, their likely impact in the long term would be to lower budget deficits.

Year by Year Analysis Over 20 Years
Here, we classify CBO's scoring of the Baucus plan into four general categories:

Gross Cost of Additional Health Insurance Coverage
Excise Tax on Cadillac Health Insurance Plans
Other Taxes and Revenue Effects
Savings accruing from reductions in outlays for Medicare, Medicaid and other health care spending

The First Ten-Year Budget Window (2010-2019)
CBO arrives at the $81 billion deficit reduction figure by first measuring the cost of coverage expansion within the bill, namely higher spending on Medicaid and subsidies for health insurance exchanges. This cost alone is $829 billion over the ten-year window (2010-2019) and is $180 billion in the final year of that window (2019).

Each of the other three CBO categories provides financing for the cost of those expanded health benefits. First, the proposed excise tax on high-valued health insurance plans—so-called Cadillac plans—is estimated to raise $201 billion in revenues from 2010 to 2019. Then, there are other taxes and revenue raisers in the package that would total approximately $305 billion in the ten-year window. Finally, CBO estimates that the Baucus plan will achieve large savings by reducing outlays for Medicare, Medicaid and other health care spending, spending reductions that would save the federal government approximately $404 billion over the ten-year window.

Table 1 below shows the effects of the health care bill for each of the years of the current ten-year window (2010-2019). As one can see, the Baucus plan would actually lower the deficit in FY 2019, hinting that out years would likely be the same as we discuss below.

Table 1 Net Effect on Deficit from Baucus Plan over 2010-2019 Budget Window, CBO Score (billions of dollars)
CBO Category	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019	10-Year
Gross Cost of Insurance Coverage	$ 0	$ 2	$ 4	$ 8	$ 56	$ 115	$ 143	$ 155	$ 166	$ 180	$ 829
Excise Tax - "Cadillac"	$ 0	$ 0	$ 0	-$ 10	-$ 18	-$ 23	-$ 30	-$ 35	-$ 40	-$ 46	-$ 201
Other Tax & Revenue Raisers	-$ 11	-$ 12	-$ 13	-$ 25	-$ 29	-$ 35	-$ 39	-$ 42	-$ 47	-$ 52	-$ 305
Spending Reductions	$ 9	-$ 1	-$ 11	-$ 21	-$ 42	-$ 47	-$ 55	-$ 66	-$ 78	-$ 93	-$ 404
Net Amount	-$ 2	-$ 11	-$ 20	-$ 47	-$ 32	$ 10	$ 20	$ 13	$ 1	-$ 12	-$ 81

The Next Ten-Year Budget Window (2020-2029)

The $404 billion savings that would accrue from Chairman Baucus's proposed cuts to Medicare and other health care programs during the first 10 years is projected by CBO to grow at a rapid rate in the latter years of this budget window. For example, from 2018 to 2019, CBO projects the savings from cutting Medicare and other health care spending that are in Chairman Baucus's plan would increase by nearly 19 percent. This high annual rate makes sense to anyone who has analyzed Medicare's long-run fiscal situation: the huge number of Baby Boomers coming into the system in the next decade is projected to make Medicare spending grow rapidly. Therefore, curtailing those benefits now will result in huge savings down the road. When CBO discussed the likely rate of growth in this category beyond the first ten years, it suggested a range of 10-15 percent, which seems quite conservative, based upon the annual growth rates in the out-years of the current ten-year window.

Regardless of whether we assume the more conservative CBO out-year growth rates or merely extend the 2019 growth rate, it is clear that the Baucus plan would not grow the deficit beyond 2019. Tables 2-4 look at some likely scenarios of the Baucus plan's likely budget impact during the ten years after the current budget window (FY 2020-2029). All these scenarios assume that the Baucus plan actually remains fairly close to the version that was scored by CBO.

Table 2 Net Effect on Deficit from Baucus Plan over 2020-2029 Budget Window, Extending CBO Figures Using CBO's Mid-Range Growth Estimate (billions of dollars)
CBO Category	2020	2021	2022	2023	2024	2025	2026	2027	2028	2029	10-Year (20-Year)
Gross Cost of Ins. Coverage	$194	$210	$227	$245	$264	$286	$308	$333	$360	$389	$2,816 (-$3,645)
Excise Tax - Cadillac	-$52	-$58	-$65	-$74	-$83	-$93	-$105	-$118	-$133	-$149	-$930 (-$1,131)
Other Tax & Rev. Raisers	-$57	-$63	-$69	-$76	-$84	-$92	-$101	-$111	-$123	-$135	-$912 (-$1,217)
Spending Reductions	-$105	-$118	-$132	-$149	-$168	-$189	-$212	-$239	-$268	-$302	-$1,881 (-2,285)
Net Amount	-$19	-$29	-$40	-$54	-$70	-$88	-$110	-$135	-$164	-$198	-$907 (-$988)
Growth rates assumed: Insurance Coverage growth rate = 8%; Excise Tax growth rate = 12.5%; other tax & revenue growth rate = 10% ; Spending reductions growth rate = 12.5%%

Table 3 Net Effect on Deficit from Baucus Plan over 2020-2029 Budget Window, Extending CBO Figures Using CBO's High-End Growth Rate (billions of dollars)
CBO Category	2020	2021	2022	2023	2024	2025	2026	2027	2028	2029	10-Year (20-Year)
Gross Cost of Insurance Coverage	$194	$210	$227	$245	$264	$286	$308	$333	$360	$389	$2,816 (-$3,645)
Excise Tax - Cadillac	-$53	-$61	-$70	-$80	-$93	-$106	-$122	-$141	-$162	-$186	-$1,074 (-$1,275)
Other Tax & Revenue Raisers	-$57	-$63	-$69	-$76	-$84	-$92	-$101	-$111	-$123	-$135	-$912 (-$1,217)
Spending Reductions	-$107	-$123	-$141	-$163	-$187	-$215	-$247	-$284	-$327	-$376	-$2,171 (-$2,575)
Net Amount	-$23	-$37	-$54	-$74	-$99	-$128	-$163	-$204	-$252	-$309	-$1,341 (-$1,422)
Growth rates assumed: Insurance Coverage growth rate = 8%; Excise Tax growth rate = 15%; other tax & revenue growth rate = 10%; Spending reductions growth rate = 15%

Table 4 Net Effect on Deficit from Baucus Plan over 2020-2029 Budget Window, Extending CBO Figures Using 2019 Growth Rate (billions of dollars)
CBO Category	2020	2021	2022	2023	2024	2025	2026	2027	2028	2029	10-Year (20-Year)
Gross Cost of Insurance Coverage	$194	$210	$227	$245	$264	$286	$308	$333	$360	$389	$2,816 ($3,645)
Excise Tax - "Cadillac"	-$53	-$61	-$70	-$80	-$93	-$106	-$122	-$141	-$162	-$186	-$1,074 (-$1,275)
Other Tax & Revenue Raisers	-$57	-$63	-$69	-$76	-$84	-$92	-$101	-$111	-$123	-$135	-$912 (-$1,217)
Spending Reductions	-$111	-$132	-$157	-$186	-$222	-$264	-$314	-$374	-$445	-$530	-$2,735 (-$3,139)
Net Amount	-$26	-$46	-$69	-$98	-$134	-$177	-$229	-$293	-$370	-$462	-$1,904 (-$1,985)
Growth rates assumed: Insurance Coverage growth rate = 8%; Excise Tax growth rate = 15%; other tax & revenue growth rate = 10%; Spending reductions growth rate = 19.1%

In short, if the Baucus plan were scored by CBO over 20 years instead of ten, it's likely that Sen. Baucus wouldn't even need to put in place the excise tax on Cadillac health plans in order for it to be deficit-neutral.

Table 4 shows what the budgetary impact would be by merely extending the 2019 growth rates into the next ten years. The spending reductions to Medicare and other health care programs are so massive that government spending, on net, would actually not change much from Chairman Baucus's proposal.

What Are The Cuts to Medicare and Other Health Care Spending in the Baucus Plan?
The CBO report details each of the reductions in spending items that Sen. Baucus's plan would implement. According to the CBO report, the bulk of the savings would accrue from three key provisions:

1. Permanent reductions in the annual updates to Medicare's payment rates for most services in the fee-for-service sector (other than physicians' services), yielding budgetary savings of $162 billion over 10 years. (That calculation excludes interactions between those provisions and others-namely, the effects of those changes on payments to Medicare Advantage plans and collections of Part B premiums.)

2. Setting payment rates in the Medicare Advantage program on the basis of the average of the bids submitted by Medicare Advantage plans in each market, yielding savings of an estimated $117 billion (before interactions) over the 2010-2019 period.

3. Reducing Medicare and Medicaid payments to hospitals that serve a large number of low-income patients, known as disproportionate share (DSH) hospitals, by almost $45 billion-composed of roughly $22 billion each from Medicaid and Medicare DSH payments.

The obvious economic question then for policymakers to answer is, "Who bears the economic burden from these spending cuts?" Would lower payment rates to Medicare providers hurt Medicare beneficiaries, or are the providers currently earning economic "rents" (above-market profits) that would disappear under this proposal? The answer is likely somewhere in between, meaning that some fraction of the spending cuts would be borne by the recipients of Medicare, i.e., the elderly, and some other fraction borne by the factors of production in the medical sector, i.e., owners of the firms and labor such as doctors. Unfortunately, nobody seems to be addressing this crucial question. One side says that firms are earning excess profits from government payments in health care. The other side tries to scare seniors by saying that the quality of Medicare will be cut. The truth lies somewhere in between. And as we show here, whoever bears that burden during the first ten-year budget window will bear a much larger burden during the next ten years.

Summary
Critics have charged that the CBO scoring of Sen. Baucus's proposal is somewhat misleading, given that the ten-year budget window includes ten years of new tax collections and spending cuts, but only seven years of substantial new government-provided health insurance. As this analysis has shown, however, the larger point of this critique—that the Baucus plan is likely to throw the federal government's out-of-balance books even further out of balance—is unlikely to prove true.

The long-term impact of Sen. Baucus's proposal (beyond the current ten-year budget window) would be to cut Medicare spending so significantly that budget deficits would fall substantially. The reason the benefit cuts achieve such remarkable savings is that they come at a time when Medicare spending is projected to skyrocket with the retirement of the baby-boom generation. CBO's projected savings, then, would dwarf any realistic assumption about the increased expenditures that are necessary to pay for the proposed government-led changes in insurance coverage.

Where Do State and Local Governments Get Their Tax Revenue?

Fri, 09 Oct 2009 00:00:00 EDT

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.

Distributional Effects of the House of Representatives Health Care Reform Bill

Tue, 06 Oct 2009 00:00:00 EDT

Fiscal Fact No. 193

Introduction

The health care reform bill that has cleared committee in the House of Representatives, HR 3200, has been praised as the fundamental reform that America's health care system needs and criticized as a step toward government-run health care.

In this Tax Foundation Fiscal Fact, we provide a somewhat different look at the bill by focusing on its distributional effects; that is, if it were signed into law as is, we estimate here how much income it would tax from some people to spend on others.¹

Income Redistribution Is at the Heart of Health Insurance Reform
For many champions of the health insurance reform plans currently being debated on Capitol Hill, a major goal is the redistribution of income down the income scale, yet no estimate of the House bill's distributional impact has thus far been done. Using economic analysis of the bill from the Congressional Budget Office (CBO), ² this analysis utilizes the Tax Foundation's Fiscal Incidence Microsimulation Model to produce estimates of how income redistribution will change if the bill becomes law. Specifically, we allocate the budgetary amount of tax increases to each family, as well as the budgetary amount of spending changes to each family (see Notes at the end for methodological assumptions).

For fiscal year 2016, the first full year in which the health care bill would be in effect, income redistribution would increase from the very top income groups, due in large part to the proposed surtax on high-income individuals. Most of that new redistribution would be spent on families in the middle of the income spectrum, and to a lesser extent to families in the upper-middle and lower-middle income levels. Some families with low incomes would gain, but they are comparatively small because most families at the lower end of the income spectrum are already covered by Medicaid or another government-provided health insurance program.

The two tables and charts below present income redistribution estimates by income group, in a before-and-after format designed to isolate the effect of the health reform plan. First we estimate the amounts of income taken from or given to each income group if all of the policies that President Obama has spelled out in his Budget become law except his health reform plan. Then we estimate how much those levels of income redistribution would change if HR 3200 were signed into law.

Average Redistribution for a Family in Each Income Group
Chart 1 presents the average amount given to or taken from one family in each income group in 2016. For the top 5 percent as a whole (minimum family market income of $358,193), the average net amount of income taken in 2016 would increase by nearly $20,000, from $167,761 to $187,550 per family. The primary beneficiaries of this additional income redistribution would be middle-income families between the 40th and 60th percentiles. Outside these two deciles in the middle of the income spectrum, the two deciles that benefit the most are the fourth decile (30th-to-40th percentiles) who would gain an average of $1,230 and the 7th decile (60th-to-70th percentiles).

Table 1 shows the estimates in more detail. We estimate that the average amount of income redistributed from the top-earning one percent of American families would increase by $88,729. That is the difference between $586,970, the amount that each family in the top one percent will have redistributed from them according to President Obama's budget except for his health plan, and $675,698, the amount of redistribution that will occur with all those policies plus the provisions of HR 3200.

Table 1 Distributional Analysis of the House of Representatives' Health Care Reform Average Amounts Taxed From and Spent on Each Income Group in Fiscal Year 2016
Family Market Income Percentile	Minimum Market Income to Be in This Group	Average Market Income Before Any Redistri-bution	Post-Redistribution				Average Amount HR3200 Redis-tributes From (-) or To (+) Each Group
			According to Obama Policy w/o Health Reform		If the House Health Reform Is Made Law
			Average Income	Redistri-bution From (-) or To (+) Each Group	Average Income	Redistri-bution From (-) or To (+) Each Group
0 - 10%	$ 0	$ 6,517	$ 28,340	+ $ 21,823	$ 28,935	+ $ 22,418	+ $ 595
10 - 20%	$ 15,391	$ 23,674	$ 37,618	+ $ 13,944	$ 38,223	+ $ 14,549	+ $ 605
20 - 30%	$ 32,059	$ 40,012	$ 50,643	+ $ 10,631	$ 51,309	+ $ 11,297	+ $ 666
30 - 40%	$ 48,083	$ 56,420	$ 64,602	+ $ 8,182	$ 65,832	+ $ 9,412	+ $ 1,230
40 - 50%	$ 65,704	$ 75,894	$ 82,788	+ $ 6,894	$ 84,694	+ $ 8,800	+ $ 1,906
50 - 60%	$ 86,929	$ 99,391	$ 104,444	+ $ 5,053	$ 106,352	+ $ 6,961	+ $ 1,908
60 - 70%	$ 112,721	$ 126,266	$ 126,695	+ $ 429	$ 127,674	+ $ 1,408	+ $ 979
70 - 80%	$ 141,101	$ 159,448	$ 155,155	- $ 4,293	$ 155,122	- $ 4,326	- $ 33
80 - 90%	$ 180,642	$ 210,818	$ 199,942	- $ 10,876	$ 199,584	- $ 11,234	- $ 358
90 - 95%	$ 252,212	$ 295,639	$ 279,039	- $ 16,600	$ 278,458	- $ 17,181	- $ 581
95 - 99%	$ 358,193	$ 519,162	$ 457,767	- $ 61,395	$ 455,471	- $ 63,691	- $ 2,296
99 - 100%	$ 917,709	$ 2,712,382	$ 2,125,413	- $ 586,969	$ 2,036,684	- $ 675,698	- $ 88,729
All Families	-	$ 117,701	$ 117,701	-	$ 117,701	-	-
Exhibit:
Top 20%	$ 180,642	$ 420,170	$ 368,623	- $ 51,547	$ 363,349	- $ 56,821	- $ 5,274
Top 10%	$ 252,212	$ 629,358	$ 537,172	- $ 92,186	$ 526,987	- $ 102,372	- $ 10,186
Top 5%	$ 358,193	$ 963,030	$ 795,268	- $ 167,761	$ 775,480	- $ 187,550	- $ 19,789
Top 1%	$ 917,709	$ 2,712,382	$ 2,125,413	- $ 586,969	$ 2,036,684	- $ 675,698	- $ 88,729
Notes: These estimates use economic assumptions spelled out in a methodology paper. See "Tax Foundation Working Paper, No. 7, "Methodology of the Tax Foundation's Fiscal Incidence Project." The deficit is assumed to be financed by combination of higher taxes and reduced spending on today's families. Savings from Medicare and Medicaid are distributed as follows: 50 percent allocated based upon share of capital income and 50 percent of amount allocated based upon calculated benefit share of Medicare and Medicaid spending.

For the middle 20 percent, we estimate that post-redistribution incomes would increase the greatest as a result of the health care bill. For example, in the middle 20 percent of the income distribution, the health care bill would increase the average amount of redistribution by $1,907.

For families at the bottom of the income distribution, redistribution would increase somewhat as a result of the House's health care bill. Redistribution to those in the bottom decile (bottom 10 percent) would increase by an average of $595 per family, while redistribution to those in the second and third deciles would increase by about $605 and $665 per family, respectively. Finally, the fourth decile (30th - 40th percentiles) would see an increase in income redistribution from the health care bill by an average of $1,230 per family.

Total Redistribution for Each Income Group
Chart 2 and Table 2 present the totals for each income group. In the aggregate, the amount of additional income redistributed from the top 30 percent to the bottom 70 percent by the House health care plan would be $122 billion, the majority of which would come from families in the top-earning 5 percent.

The deciles that gain the most in total are the same as those that gain the most on average: the four in the middle from the 30th to the 70th percentiles. However, the total amounts are not a mirror image of the average amounts because there are an equal number of people in each decile, not an equal number of families. In general, family size increases with income. Two-earner families are most numerous in the upper-middle and upper-income groups, and low-income singles, each counting as a family unit, predominate in the lower-income groups. As a result, the lower-income groups appear to do better in the aggregate than on average because the totals are divided up among more families. At the high end, the reverse is true: redistribution seems more dramatic on average than in the aggregate.

Table 2 presents aggregate data in the same before-and-after format as Table 1. In FY 2016, the top-earning ten percent of the nation's families is expected to earn about $7.3 trillion dollars in market income. Of that, almost $1.1 trillion will be redistributed down the income scale if all of President Obama's policies become law except for health reform. If in addition to those policies, health insurance reform becomes law in the form of HR 3200, an additional $117 billion will be redistributed, and the total income redistribution will increase to approximately $1.2 trillion that year.

Table 2 Distributional Analysis of the House of Representatives' Health Care Reform Aggregate Amounts Taxed From and Spent on Each Income Group in Fiscal Year 2016
Income Percentile	Minimum Income to Be in This Group	Income Before Any Redistribution		Income After Redistribution				Total Amount HR3200 Redis-tributes From (-) or To (+) Each Group ($Millions)
		Income Before Any Redistribution		According to Obama Policy w/o Health Reform		If the House Health Reform Is Made Law
		$Millions	Share of Total	$Millions	Share of Total	$Millions	Share of Total
0 - 10%	$0	$120,351	0.7%	$523,363	2.9%	$534,351	3.0%	+ $10,988
10 - 20%	$15,391	$435,567	2.5%	$692,116	3.9%	$703,247	4.0%	+ $11,131
20 - 30%	$32,059	$701,575	3.9%	$887,980	5.0%	$899,658	5.1%	+ $11,678
30 - 40%	$48,083	$922,418	5.2%	$1,056,186	5.9%	$1,076,296	6.1%	+ $20,110
40 - 50%	$65,704	$1,139,180	6.4%	$1,242,660	7.0%	$1,271,270	7.2%	+ $28,610
50 - 60%	$86,929	$1,319,313	7.4%	$1,386,386	7.8%	$1,411,713	7.9%	+ $25,327
60 - 70%	$112,721	$1,548,151	8.7%	$1,553,411	8.7%	$1,565,414	8.8%	+ $12,003
70 - 80%	$141,101	$1,887,507	10.6%	$1,836,688	10.3%	$1,836,297	10.3%	- $391
80 - 90%	$180,642	$2,439,073	13.7%	$2,313,242	13.0%	$2,309,100	13.0%	- $4,142
90 - 95%	$252,212	$1,711,423	9.6%	$1,615,328	9.1%	$1,611,964	9.1%	- $3,364
95 - 99%	$358,193	$2,397,483	13.5%	$2,113,962	11.9%	$2,103,359	11.8%	- $10,603
99 - 100%	$917,709	$3,178,190	17.9%	$2,490,419	14.0%	$2,386,452	13.4%	- $103,967
All Families	-	$17,764,338	100.0%	$17,764,338	100.0%	$17,764,338	100.0%	$0
Exhibit:
Top 20%	$180,642	$9,726,169	54.7%	$8,532,951	48.0%	$8,410,875	47.3%	- $122,076
Top 10%	$252,212	$7,287,096	41.0%	$6,219,709	35.0%	$6,101,775	34.3%	- $117,934
Top 5%	$358,193	$5,575,673	31.4%	$4,604,381	25.9%	$4,489,811	25.2%	- $114,570
Top 1%	$917,709	$3,178,190	17.9%	$2,490,419	14.0%	$2,386,452	13.4%	- $103,967
Notes: These estimates use economic assumptions spelled out in a methodology paper, Tax Foundation Working Paper, No. 7 "Methodology of the Tax Foundation's Fiscal Incidence Project," by Gerald Prante and Patrick Fleenor. The deficit is assumed to be financed by combination of higher taxes and reduced spending on today's families. Savings from Medicare and Medicaid are distributed as follows: 50 percent of amount allocated based upon share of capital income and 50 percent of amount allocated based upon calculated benefit share of Medicare and Medicaid spending.

Notes

• Surtax is assumed to be borne entirely by those who face higher individual income tax liabilities.

• Fungible value of Medicaid is assumed to benefit recipient only, whereas the residual is allocated 50/50 to all families as a public good (public health) and paternalism to those families receiving Medicaid.

• For the exchange subsidies, it is assumed that the full benefit flows to those participating in the exchange and receiving subsidies.

Endnotes

1. This analysis ignores any efficiency gains or losses (i.e. aggregate income growth) resulting from the proposed health care legislation.

2. Letter to the Honorable Charles B. Rangel from Douglas W. Elmendorf, dated July 17, 2009. See http://www.cbo.gov/ftpdocs/104xx/doc10464/hr3200.pdf.

Tax Watch, Fall 2009

Tue, 29 Sep 2009 00:00:00 EDT

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Are State Corporate Taxes Hurting Wages?
Income Tax: Top 1 Percent Pay More than Bottom 95
Ideas on the Web: Booming Web Traffic Reaches Millions
Study: Tax Increases Cost Twice the Revenue Raised

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New Census Data on Property Taxes on Homeowners

Tue, 22 Sep 2009 00:00:00 EDT

Fiscal Fact No. 192

The Census Bureau has released new housing numbers courtesy of the 2008 American Community Survey (ACS), which includes real estate taxes paid on owner-occupied housing units. Data is included for many geographical units, including states and high-population counties.^1, ²

The Tax Foundation has long published historical data on property tax collections compiled by the Census Bureau's Government Finances division. However, such data includes not only taxes paid by individual homeowners, but also property taxes paid by businesses, as well as some special types of property pertaining to minerals or fuels found mostly in a handful of states, such as Texas, Wyoming and Alaska. When people want to know where property taxes are the highest, though, they typically wonder about property taxes levied specifically on homeowners. This is where the ACS data is useful.

Background Information on American Community Survey Data

The ACS relies on survey data collected from households, just as the Census collects most of its information. The survey data collected in the ACS, as well as in other Census household surveys such as the Current Population Survey (CPS), is used in many government functions, such as decisions on how to distribute spending geographically and the calculation of the official poverty estimates and labor market statistics, among others. In fact, the real estate taxes data featured here is actually used by some government agencies, including the Department of Agriculture, in determining spending.

The ACS releases annual one-year data for various housing and person variables for areas with populations greater than 65,000. Furthermore, the ACS now annually releases three-year averages for areas with populations greater than 20,000. Such data for 2008 will be available in mid-to-late October this year, and the Tax Foundation will update the relevant data then as well.

For a chart of real estate taxes paid on owner-occupied housing for each of the 790 high-population counties (65,000 or greater)³ for 2008, see the Tax Foundation Web site: http://www.taxfoundation.org/taxdata/show/1888.html (ranked by taxes as a percentage of home value) or http://www.taxfoundation.org/taxdata/show/23649.html (ranked by dollar amount of median real estate taxes).

(For a chart of the three-year average of real estate taxes paid on owner-occupied housing for each of the 2,000+ counties with populations greater than 20,000 for 2005-2007, see here: http://www.taxfoundation.org/taxdata/show/24052.html).

The Results

The rankings have changed little from last year's, where the Northeast, specifically New York and New Jersey, dominated the highest-taxed counties. The complete table provides rankings of median real estates taxes paid by dollar amount, as well as rankings by median real estate taxes as a percentage of the median home value and as a percentage of the median income for household-owning units.

Below is a list of the top 10 counties ranked by two different measures: by actual dollar value and as a percentage of home value.

Table 1
Top 10 Counties in Median Real Estate Taxes Paid, 2008

County	State	Median Real Estate Taxes Paid
Westchester	New York	$8,890
Nassau	New York	$8,628
Hunterdon	New Jersey	$8,492
Bergen	New Jersey	$8,446
Rockland	New York	$8,430
Essex	New Jersey	$7,924
Somerset	New Jersey	$7,743
Morris	New Jersey	$7,557
Passaic	New Jersey	$7,370
Putnam	New York	$7,324

Source: 2008 American Community Survey

Table 2
Top 10 Counties in Median Real Estate Taxes Divided by Median Home Value, 2008

County	State	Median Real Estate Taxes as a Percentage of Median Home Value
Niagara	New York	2.89%
Monroe	New York	2.85%
Wayne	New York	2.82%
Chautauqua	New York	2.60%
Cayuga	New York	2.54%
Cattaraugus	New York	2.52%
Onondaga	New York	2.51%
Erie	New York	2.48%
Oswego	New York	2.42%
Chemung	New York	2.38%

Source: 2008 American Community Survey, Tax Foundation calculations

We have also created a similar table showing this data for every state, which can be found at http://www.taxfoundation.org/taxdata/show/1913.html. Below is a list of the top 10 and bottom 10 states in median real estate taxes paid in 2008. The story for the states is much the same as for the top counties: the Northeast area of the country has the highest property taxes, along with pockets elsewhere, such as Wisconsin, Texas, Nebraska, and Illinois.

Table 3: Top 10 and Bottom 10 States in Median Real Estate Taxes Paid, 2008

Rank	State	Median Real Estate Taxes Paid
1	New Jersey	$6,320
2	Connecticut	$4,603
3	New Hampshire	$4,501
4	New York	$3,622
5	Rhode Island	$3,534
6	Massachusetts	$3,406
7	Illinois	$3,384
8	Vermont	$3,281
9	Wisconsin	$2,963
10	California	$2,829
41	Tennessee	$924
42	New Mexico	$843
43	Kentucky	$823
44	Oklahoma	$762
45	South Carolina	$678
46	Arkansas	$534
47	Mississippi	$468
48	West Virginia	$457
49	Alabama	$383
50	Louisiana	$188

Source: 2008 American Community Survey

Table 4
Top 10 and Bottom 10 States in Median Real Estate Taxes Divided by Median Home Value

Rank	State	Median Real Estate Taxes as a Percentage of Median Home Value
1	Texas	1.76%
2	New Jersey	1.74%
3	Nebraska	1.72%
4	Wisconsin	1.71%
5	New Hampshire	1.70%
6	Illinois	1.57%
7	Vermont	1.53%
8	Connecticut	1.50%
9	Michigan	1.45%
10	North Dakota	1.41%
41	Wyoming	0.54%
42	New Mexico	0.51%
43	Arkansas	0.51%
44	South Carolina	0.49%
45	West Virginia	0.48%
46	Mississippi	0.47%
47	Delaware	0.43%
48	Alabama	0.32%
49	Hawaii	0.24%
50	Louisiana	0.14%

Source: 2008 American Community Survey, Tax Foundation calculations

Conclusion
The Northeast remains the area with the highest property taxes on homeowners. These states also have high per capita income, and the highest property tax bills, in terms of dollar amounts, are usually found in the areas with the highest incomes. As for the percentage-of-home-value measure, counties in upstate New York still dominate as they tend to impose high property taxes on homeowners, albeit in a location with lower home values and thereby higher effective tax rates.

Notes

1. Official definition of real estate taxes paid: The data on real estate taxes were obtained from Housing Question 20 in the 2008 American Community Survey. The question was asked at owner-occupied units. The statistics from this question refer to the total amount of all real estate taxes on the entire property (land and buildings) payable to all taxing jurisdictions, including special assessments, school taxes, county taxes, and so forth.

Real estate taxes include state, local, and all other real estate taxes even if delinquent, unpaid, or paid by someone who is not a member of the household. However, taxes due from prior years are not included. If taxes are paid on other than a yearly basis, the payments are converted to a yearly basis.

The payment for real estate taxes is added to payments for fire, hazard, and flood insurance; utilities and fuels; and mortgages (both first and second mortgages, home equity loans, and other junior mortgages) to derive "Selected Monthly Owner Costs" and "Selected Monthly Owner Costs as a Percentage of Household Income." A separate question (Question 22c in the 2008 American Community Survey) determines whether real estate taxes are included in the mortgage payment to the lender(s). This makes it possible to avoid counting taxes twice in the computations.

2. Official definition of owner-occupied housing units: A housing unit is owner-occupied if the owner or co-owner lives in the unit even if it is mortgaged or not fully paid for. The owner or co-owner must live in the unit and usually is Person 1 on the questionnaire. The unit is "Owned by you or someone in this household with a mortgage or loan" if it is being purchased with a mortgage or some other debt arrangement such as a deed of trust, trust deed, contract to purchase, land contract, or purchase agreement. The unit also is considered owned with a mortgage if it is built on leased land and there is a mortgage on the unit. Mobile homes occupied by owners with installment loan balances also are included in this category.

A housing unit is "Owned by you or someone in this household free and clear (without a mortgage)" if there is no mortgage or other similar debt on the house, apartment, or mobile home including units built on leased land if the unit is owned outright without a mortgage.

For complete description of all ACS variables: http://www.census.gov/acs/www/Downloads/2008/usedata/Subject_Definitions.pdf

3. The high-population counties make up about 25 percent of the nation's counties but over 80 percent of the population.

4. The figures here are not adjusted for property tax relief programs that are administered through a state's income tax.

5. The taxes paid figures are essentially measures of the legal incidence of the property tax, whereas the economic incidence is unclear and is likely impacted by who was the occupant of the house during the last tax change, assuming rational expectations. These figures also do not account for the value of the government services that are financed by those tax dollars.

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