While there are many ways to show how much is collected in taxes by state governments, our Index is designed to show how well states structure their tax systems by focusing on the how more than the how much in recognition of the fact that there are better and worse ways to raise revenue.
The federal tax code remains a major source of frustration and controversy for Americans, and a hindrance to economic growth and opportunity. Other countries, such as Estonia, have proven that sufficient tax revenue can be collected in a less frustrating and more efficient way.
While there are many factors that affect a country’s economic performance, taxes play an important role. A well-structured tax code is easy for taxpayers to comply with and can promote economic development while raising sufficient revenue for a government’s priorities.
Tax burdens rose across the country as pandemic-era economic changes caused taxable income, activities, and property values to rise faster than net national product. Tax burdens in 2020, 2021, and 2022 are all higher than in any other year since 1978.
States are unprepared for the ongoing shift to remote and flexible work arrangements, or for the industries and activities of today, to say nothing of tomorrow. In some states, moreover, existing tax provisions exacerbate the impact of high inflation and contribute to the supply chain crisis.
A landmark comparison of corporate tax costs in all 50 states, Location Matters provides a comprehensive calculation of real-world tax burdens, going beyond headline rates to demonstrate how tax codes impact businesses and offering policymakers a road map to improvement.
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As economic activity resumes and the task of accounting for the deficits incurred in navigating the crisis of the past year becomes the focus of fiscal policy deliberations, a greater reliance on VAT could be an important tool in ensuring fiscal stability going forward. Countries should use this as an opportunity to improve VAT systems by re-examining carveouts in the form of exemptions and reduced rates.
Of all alcoholic beverages subject to taxation, stiff drinks—and all distilled spirits—face the stiffest tax rates. Like many excise taxes, the treatment of distilled spirits varies widely across the states.
Corporate income taxes are commonly levied as a flat rate on business profits. However, some countries provide reduced corporate income tax rates for small businesses. Out of 27 European OECD countries covered in today’s map, eight levy a reduced corporate tax rate on businesses that have revenues or profits below a certain threshold.
Krispy Kreme may have started the vaccine incentive ball rolling, but many states are putting big money into the effort with vaccine lotteries. Unlike a normal lottery, no one is paying for tickets—but the tax collector still gets paid when someone wins.
In recent years, several countries have taken measures to reduce carbon emissions, including instituting environmental regulations, emissions trading systems (ETS), and carbon taxes.
Although most states are on solid financial footing following the coronavirus crisis, pension liabilities are a deep-seated problem that long predates the pandemic.
As tempting as inheritance, estate, and gift taxes might look especially when the OECD notes them as a way to reduce wealth inequality, their limited capacity to collect revenue and their negative impact on entrepreneurial activity, savings, and work should make policymakers consider their repeal instead of boosting them.
Most countries provide tax relief to families with children—typically through targeted tax breaks that lower income taxes. While all European OECD countries provide tax relief for families, its extent varies substantially across countries.
Thirteen states tax Social Security benefits, a matter of significant interest to retirees. Each of these states has its own approach to determining what share of benefits is subject to tax, though these provisions can be grouped together into a few broad categories.
Property taxes are an important source of revenue for local and state governments. In FY 2018, property taxes generated over 30 percent of total U.S. state and local tax collections and over 70 percent of local tax collections.
Governments often justify higher tax burdens with more extensive public services. However, the cost of these services can be more than half of an average worker’s salary.
New Joint Committee on Taxation (JCT) data indicates that the federal tax system is progressive, consistent with similar analysis by the Congressional Budget Office (CBO), and the OECD.
Rightsizing a state’s sales tax base can not only make the tax more equitable and better align it with the modern economy but also generate revenue that can be used to pay down the rates of more harmful taxes. That is why sales tax base broadening, which is favored by public finance scholars across the political spectrum, features in many tax reform plans.
The taxation of capital—at both the individual and the corporate level—is much debated and affects economic growth by lowering the incentives to save and invest.
Most countries’ personal income taxes have a progressive structure, meaning that the tax rate paid by individuals increases as they earn higher wages. The highest tax rate individuals pay differs significantly across Europe, with Denmark (55.9 percent), France (55.4 percent), and Austria (55 percent) having the highest top statutory personal income tax rates among European OECD countries.
Location Matters is an account of tax complexity and the ways that tax structure affect competitiveness. For policymakers, it represents an opportunity to explore the seemingly more arcane tax provisions that can have a significant impact on business tax burdens, and to discover how their tax code—often completely by accident—picks winners and losers.
Under President Biden’s tax plan, the United States would tax corporate income at the highest top rate in the industrialized world, averaging 65.1 percent.
Estate tax is levied on the property of the deceased and is paid by the estate itself. Inheritance taxes, in contrast, are only levied on the value of assets transferred and are paid by the heirs. Gift taxes are levied when property is transferred by a living individual. The majority of European countries covered in today’s map currently levy estate, inheritance, or gift taxes.
OECD Report: Tax Revenue as a Percent of GDP in Latin American and Caribbean Countries Is below the OECD Average
Taxes on goods and services were on average the greatest source of tax revenue for Latin American and Caribbean countries