Janelle Fritts was a Policy Analyst with the Tax Foundation’s Center for State Tax Policy. She is the lead researcher on the annual State Business Tax Climate Index and was one of the lead authors of Pro-Growth Tax Reform for Oklahoma. Her work has been cited in The New York Times, the Associated Press, Bloomberg, and numerous state media outlets across the country.
Before joining the Tax Foundation team, Janelle interned at the Mackinac Center for Public Policy, the Reason Foundation, and the Illinois Policy Institute. She graduated from Dordt College (Sioux Center, Iowa) with a bachelor’s degree in English with a writing emphasis and a minor in Chemistry.
Janelle was born and raised in Midland, Michigan, which is near Lake Huron and about halfway up the “mitten.” In her free time, she enjoys rock climbing, hiking, swing dancing, and singing. You’ll also find her rocking out to metal in Roxanne, her bright yellow Celica.
The individual income tax is one of the most significant sources of revenue for state and local governments, generating approximately 24 percent of state and local tax collections in FY 2018.
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Although Tax Day has been pushed back this year, mid-April is still a good occasion to take a look at tax collections in the United States. Because differing state populations can make overall comparisons difficult, today’s state tax map shows state and local tax collections per capita in each of the 50 states and the District of Columbia.
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Several states are considering introducing or increasing taxes on vapor products to make up declining tax revenue from traditional tobacco products or to fill budget holes in the wake of the coronavirus pandemic. However, lawmakers should approach the issue carefully because flawed excise tax design on vapor products could drive consumers back to more harmful combustible products like cigarettes.
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Capital stock taxes are imposed on a business’s net worth (or accumulated wealth). As such, the tax tends to penalize investment and requires businesses to pay regardless of whether they make a profit in a given year, or ever.
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Inventory taxes are levied regardless of whether a business makes a profit, adding to the burden of businesses already struggling to stay afloat.
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Moving away from state gross receipts taxes would represent a pro-growth change to make the tax code friendlier to businesses and consumers alike, which is especially necessary in the wake of the coronavirus pandemic.
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Our updated 2021 edition of Facts & Figures serves as a one-stop state tax data resource that compares all 50 states on over 40 measures of tax rates, collections, burdens, and more.
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A year ago, it seemed possible that New Hampshire was headed toward a triggered tax increase. Instead, lawmakers may trim business tax rates and begin the phaseout of the state’s tax on interest and dividend income, which would take away the asterisk and make New Hampshire the ninth state to forgo an individual income tax altogether.
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In addition to the federal estate tax, with a top rate of 40 percent, some states levy an additional estate or inheritance tax. Twelve states and Washington, D.C. impose estate taxes and six impose inheritance taxes. Maryland is the only state to impose both. Most states have been moving away from estate or inheritance taxes or have raised their exemption levels, as estate taxes without the federal exemption hurt a state’s competitiveness.
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Learn more about the recent Alabama tax reform measures (House Bill 170), which combines pandemic-era tax policy responses with broader tax policy reforms.
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Sources of state revenue have come under closer scrutiny in light of the impact of the coronavirus pandemic, as different tax types have differing volatility and economic impact—although even beyond these unique circumstances, it is important for policymakers to understand the trade-offs associated with different sources of tax revenue.
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Two states—Florida and Missouri—have held back on online sales taxes thus far following the landmark 2018 Supreme Court case, South Dakota v. Wayfair. Now, lawmakers in both states have filed bills to address the issue this session.
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North Carolina’s 2.5 percent corporate tax rate is the lowest in the country, followed by Missouri (4 percent) and North Dakota (4.31 percent). Seven other states impose top rates at or below 5 percent: Florida (4.458 percent), Colorado (4.55 percent), Arizona (4.9 percent), Utah (4.95 percent), and Kentucky, Mississippi, and South Carolina (5 percent).
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Consumption taxes (like sales taxes) are more economically neutral than taxes on capital and income because they target only current consumption. Consumption taxes are generally more stable than income taxes in economic downturns as well.
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New Hampshire and Alaska rely most heavily on property taxes. Neither have individual income taxes, and in New Hampshire, significant government authority often vested in state government is devolved to the local level, where services are overwhelmingly funded by property taxes.
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States compete with each other in a variety of ways, including in attracting (and retaining) residents. Sustained periods of inbound migration lead to (and reflect) greater economic output and growth. Prolonged periods of net outbound migration, however, can strain state coffers, contributing to revenue declines as economic activity and tax revenue follow individuals out of state.
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While many factors influence business location and investment decisions, sales taxes are something within lawmakers’ control that can have immediate impacts.
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Lt. Governor Griffin’s goal to eliminate the income tax is a commendable one that should be considered with cautious optimism, though with the understanding that even a well-designed process may end up putting more weight on an already uncompetitive sales tax. In the meantime, there is plenty of space for incremental improvements in Arkansas’s income tax that will make the state more competitive.
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