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How Much Does Your State Collect in Taxes Per Capita?

3 min readBy: Jared Walczak

States impose a wide range of taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. es, and the ones that most capture our attention aren’t always the largest sources of revenue. Considering the states in aggregate, the largest source of state and local tax collections is the property taxA property tax is primarily levied on immovable property like land and buildings, as well as on tangible personal property that is movable, like vehicles and equipment. Property taxes are the single largest source of state and local revenue in the U.S. and help fund schools, roads, police, and other services. , at 32.1 percent of collections in Fiscal Year 2012, the most recent year for which such data are available. The sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. is next at 22.7 percent, followed by individual income taxAn individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment. Though barely 100 years old, individual income taxes are the largest source of tax revenue in the U.S. es at 22.1 percent. The corporate income taxA corporate income tax (CIT) is levied by federal and state governments on business profits. Many companies are not subject to the CIT because they are taxed as pass-through businesses, with income reportable under the individual income tax. accounts for a mere 3.5 percent of state and local collections nationwide, while other taxes—gross receipts, severance, unemployment insurance, recordation, and many others—sweep up the final 19.5 percent.

Every state has a different basket of taxes and strikes a different balance—and of course, every state imposes a different level of taxation. Today’s map looks at state tax collections per capita. We will look at combined state and local collections some other time, but in today’s analysis, property taxes all but vanish from consideration, as they are predominantly assessed at the local level, while income and sales taxes, along with miscellaneous business taxes, take center stage.

Tax collections per capita is not a measure of tax burdens per se. (We look at tax burdens separately.) In a state with high per capita incomes, a higher per capita tax burden may work out to similar burden as a percentage of income as experienced in a state that is less well off. It does, however, offer us a window on the cost of government in any given state. If we think of each resident as a consumer of state services, per capita tax collections gives us the per person cost. Individual taxpayer liability will, of course, vary—especially if the state can export its collections.

North Dakota ranks first with $7,438 per capita, and Alaska is second-highest with per capita collections of $7,005. North Dakotans and Alaskans, however, are only paying a small share of that burden. Since so much of these states’ tax revenue comes from severance taxes, the economic incidence of North Dakota and Alaska taxes is borne, in significant part, by consumers of petroleum and natural gas products across the country. What we can see, however, is that these states raise an anomalously large amount of tax revenue per person. At the other extreme, New Hampshire only raises $1,777 per capita.

State tax collections per capita can vary for a variety of reasons, and sometimes collections are modest in states with above-average state products. Lower taxes in some states may correlate with greater economic growth, and beyond that, states where the majority of residents are well-off may have fewer governmental expenses than those which need to dedicate more resources to anti-poverty programs, even after federal transfers are taken into account.

At $2,583, Indiana is just about in the middle, ranking 25th overall. Where does your state rank?

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