The growing trend in recent years has been to raise revenue in ways that are politically feasible, which is why new Census data shows that the fastest growing tax at the state and local level has been tobacco taxes, despite rapidly growing property taxes. Raising taxes on tobacco products is an easy political sell because tobacco 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. revenue benefits all taxpayers but only a minority of people must pay any significant amount of the tax.
The following table shows the percent change in tax revenue combined at the state/local level by type of tax from fiscal year 2000 through fiscal year 2005. The figures are not adjusted for inflation, and are therefore nominal. Of the big tax sources (property, income and sales), property taxes have risen the most, followed by general sales.
Knowing what we know generally about the incidence of these taxes, it appears as if those tax sources that are growing more rapidly are the more regressive taxes like general sales, public utilities, and tobacco (and property somewhat, depending on the incidence assumption one makes). Individual income taxes, on the other hand, are the slowest growing source of tax revenue for state and local governments in percent terms.
| Type of Tax (Census defined) |
State & Local Tax Revenue Increase from 2000 – 2005 |
| Total Tax Collections | 25.7% |
| Property Taxes | 34.7% |
| General Sales | 22.2% |
| Motor Fuel | 15.6% |
| Alcoholic Beverages | 17.1% |
| Tobacco Products | 55.4% |
| Public Utilities | 26.5% |
|
Other Selective |
34.2% |
| Individual Income | 13.8% |
| Corporate Income | 19.6% |
| Motor Vehicle Licenses | 19.8% |
| Other Taxes | 48.1% |
Note: This table does not look at the growth in what Census defines as “non-tax revenue sources” such as tolls, lotteries, etc.
Share this article