Monday Map: State and Local Tax Deductions

August 27, 2012

Nick Kasprak

Nick Kasprak

Today's Monday Map focuses on the deduction of state and local income or sales taxes from federal taxable income. New York State benefits the most from this deduction – its residents deducted an average of 6.16% of their income in state taxes. Alaska benefits least, having neither an income tax nor a statewide sales tax; the small average of 0.26% most likely comes from local sales taxes.

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View previous Monday Maps here.

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A 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.

A 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.