Fiscal Fact No. 225
As the economic recessionA recession is a significant and sustained decline in the economy. Typically, a recession lasts longer than six months, but recovery from a recession can take a few years. continued through fiscal year 2009, state 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. revenues fell significantly, with only five states collecting more in 2009 than they had in 2008. Among the 45 states that collected less in 2009, many saw declines of more than 10 percent–all this despite the many tax hikes that states enacted. In addition to presenting new Census data for 2009 and comparing it to 2008, we take a look back at the last decade, examining tax revenue by type to identify the sources of tax volatility.
|
Table 1 |
||||||
|
State |
Total Tax |
Ranking |
State |
Total Tax |
Ranking |
|
|
United States |
– 8.9 |
– |
Montana |
– 2.1 |
12 |
|
|
Alabama |
– 8.8 |
29 |
Nebraska |
– 5.5 |
19 |
|
|
Alaska |
– 51.9 |
50 |
Nevada |
– 9.4 |
34 |
|
|
Arizona |
– 19.7 |
49 |
New Hampshire |
– 5.7 |
20 |
|
|
Arkansas |
– 0.8 |
7 |
New Jersey |
– 11.9 |
41 |
|
|
California |
– 15.0 |
46 |
New Mexico |
– 15.1 |
47 |
|
|
Colorado |
– 10.3 |
36 |
New York |
– 0.5 |
6 |
|
|
Connecticut |
– 12.1 |
43 |
North Carolina |
– 10.6 |
37 |
|
|
Delaware |
– 4.4 |
17 |
North Dakota |
+ 4.3 |
2 |
|
|
Florida |
– 11.5 |
38 |
Ohio |
– 8.7 |
28 |
|
|
Georgia |
– 11.7 |
39 |
Oklahoma |
– 2.1 |
11 |
|
|
Hawaii |
– 8.8 |
30 |
Oregon |
+ 1.9 |
3 |
|
|
Idaho |
– 14.1 |
45 |
Pennsylvania |
– 6.6 |
24 |
|
|
Illinois |
– 8.6 |
27 |
Rhode Island |
– 6.6 |
23 |
|
|
Indiana |
– 1.4 |
8 |
South Carolina |
– 16.8 |
48 |
|
|
Iowa |
+ 1.3 |
4 |
South Dakota |
+ 0.9 |
5 |
|
|
Kansas |
– 6.7 |
25 |
Tennessee |
– 10.0 |
35 |
|
|
Kentucky |
– 3.0 |
13 |
Texas |
– 9.1 |
32 |
|
|
Louisiana |
– 9.4 |
33 |
Utah |
– 11.9 |
42 |
|
|
Maine |
– 8.2 |
26 |
Vermont |
– 1.5 |
9 |
|
|
Maryland |
– 3.8 |
14 |
Virginia |
– 12.8 |
44 |
|
|
Massachusetts |
– 11.7 |
40 |
Washington |
– 9.0 |
31 |
|
|
Michigan |
– 5.1 |
18 |
West Virginia |
– 1.9 |
10 |
|
|
Minnesota |
– 6.5 |
22 |
Wisconsin |
– 4.0 |
16 |
|
|
Mississippi |
– 3.9 |
15 |
Wyoming |
+ 13.9 |
1 |
|
|
Missouri |
– 5.8 |
21 |
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|
Source: Data from U.S. Census Bureau |
As Table 1 indicates, revenue increased in five states: Iowa, North Dakota, Oregon, South Dakota and Wyoming. The states with the largest percentage declines were Alaska, Arizona, South Carolina, New Mexico, and California. Sixteen states saw double-digit decreases. It should be emphasized that all local revenues, most notably real estate taxAn estate tax is imposed on the net value of an individual’s taxable estate, after any exclusions or credits, at the time of death. The tax is paid by the estate itself before assets are distributed to heirs. es, are excluded from this presentation.
|
Table 2 |
|||||
|
State-Level |
Individual |
Corporate |
General |
Selective |
|
|
United States |
+ 3.6 |
– 12.5 |
– 23.1 |
– 5.5 |
– 2.7 |
|
Alabama |
+ 4.8 |
– 14.5 |
– 6.1 |
– 10.0 |
– 0.6 |
|
Alaska |
+ 30.8 |
n.a. |
– 43.3 |
n.a. |
– 13.5 |
|
Arizona |
– 7.7 |
– 53.9 |
– 27.9 |
– 12.5 |
+ 0.1 |
|
Arkansas |
+ 7.2 |
– 4.6 |
+ 1.1 |
– 1.5 |
+ 1.5 |
|
California |
+ 2.4 |
– 22.8 |
– 21.6 |
– 9.8 |
– 5.6 |
|
Colorado |
n.a. |
– 14.0 |
– 42.6 |
– 8.5 |
– 2.6 |
|
Connecticut |
n.a. |
– 16.2 |
– 30.6 |
– 7.5 |
– 6.0 |
|
Delaware |
n.a. |
– 10.0 |
– 38.7 |
n.a. |
– 2.1 |
|
Florida |
– 89.7 |
n.a. |
– 18.4 |
– 11.2 |
– 1.7 |
|
Georgia |
+ 1.0 |
– 12.5 |
– 30.3 |
– 8.8 |
– 11.0 |
|
Hawaii |
n.a. |
– 14.3 |
– 29.0 |
– 6.2 |
– 2.8 |
|
Idaho |
n.a. |
– 20.1 |
– 28.9 |
– 11.1 |
– 7.3 |
|
Illinois |
+ 7.7 |
– 11.7 |
– 12.4 |
– 6.0 |
– 7.2 |
|
Indiana |
+ 4.5 |
– 11.4 |
– 8.1 |
+ 7.8 |
– 0.2 |
|
Iowa |
n.a. |
– 5.2 |
– 27.1 |
17.8 |
– 4.5 |
|
Kansas |
+ 1.4 |
– 7.5 |
– 35.0 |
– 1.7 |
– 1.1 |
|
Kentucky |
+ 2.0 |
– 4.9 |
– 31.2 |
– 0.6 |
– 2.0 |
|
Louisiana |
+ 31.9 |
– 7.5 |
– 13.8 |
– 15.4 |
– 1.3 |
|
Maine |
+ 11.2 |
– 13.1 |
– 25.3 |
– 4.7 |
– 2.6 |
|
Maryland |
+ 8.8 |
– 6.9 |
+ 1.8 |
+ 2.7 |
– 9.0 |
|
Massachusetts |
– 24.6 |
– 16.4 |
– 19.7 |
– 5.5 |
+ 3.1 |
|
Michigan |
+ 3.3 |
– 17.5 |
– 93.0 |
+ 14.1 |
– 4.2 |
|
Minnesota |
+ 0.1 |
– 11.3 |
– 28.7 |
– 3.9 |
+ 3.6 |
|
Mississippi |
– 1.0 |
– 4.3 |
– 17.0 |
– 3.5 |
+ 1.6 |
|
Missouri |
+ 3.6 |
– 7.0 |
– 31.8 |
– 6.3 |
+ 1.7 |
|
Montana |
+ 6.5 |
– 5.1 |
+ 1.6 |
n.a. |
– 2.8 |
|
Nebraska |
– 14.2 |
– 7.5 |
– 16.0 |
– 2.0 |
+ 1.9 |
|
Nevada |
+ 5.8 |
n.a. |
n.a. |
– 13.7 |
– 11.2 |
|
New Hampshire |
+ 1.3 |
– 18.3 |
– 21.9 |
n.a. |
+ 4.5 |
|
New Jersey |
– 22.0 |
– 16.7 |
– 16.2 |
– 8.5 |
– 1.9 |
|
New Mexico |
+ 12.1 |
– 26.2 |
– 54.1 |
– 3.3 |
– 16.3 |
|
New York |
n.a. |
+ 0.8 |
– 12.9 |
– 2.0 |
+ 3.4 |
|
North Carolina |
n.a. |
– 13.9 |
– 28.9 |
– 6.0 |
– 5.4 |
|
North Dakota |
+ 2.1 |
+ 15.4 |
– 22.2 |
+ 13.6 |
– 2.0 |
|
Ohio |
n.a. |
– 16.8 |
– 36.6 |
– 7.1 |
– 1.2 |
|
Oklahoma |
n.a. |
– 9.1 |
– 4.9 |
+ 3.1 |
+ 6.0 |
|
Oregon |
+ 2.5 |
+ 9.0 |
– 59.3 |
n.a. |
– 2.1 |
|
Pennsylvania |
– 5.5 |
– 8.6 |
– 22.9 |
– 4.3 |
2.6 |
|
Rhode Island |
+ 39.6 |
– 12.7 |
– 29.4 |
– 3.9 |
+ 6.3 |
|
South Carolina |
+ 0.6 |
– 34.7 |
– 37.4 |
– 4.7 |
– 5.0 |
|
South Dakota |
n.a. |
n.a. |
– 35.6 |
3.2 |
– 3.8 |
|
Tennessee |
n.a. |
– 27.0 |
– 20.8 |
– 7.2 |
– 7.9 |
|
Texas |
n.a. |
n.a. |
n.a. |
– 3.0 |
– 10.7 |
|
Utah |
n.a. |
– 11.1 |
– 46.4 |
– 11.9 |
– 3.9 |
|
Vermont |
+ 11.8 |
– 15.6 |
+ 2.3 |
– 5.4 |
– 3.0 |
|
Virginia |
+ 34.5 |
– 12.6 |
– 21.6 |
– 8.1 |
– 13.3 |
|
Washington |
+ 2.5 |
n.a. |
n.a. |
– 12.2 |
+ 0.6 |
|
West Virginia |
+ 5.1 |
2.5 |
– 24.7 |
0.0 |
– 3.5 |
|
Wisconsin |
+ 7.3 |
– 6.5 |
– 31.3 |
– 4.3 |
+ 20.5 |
|
Wyoming |
+ 3.0 |
n.a. |
n.a. |
+ 0.9 |
– 3.1 |
|
* In most states this refers to personal property such Source: Data from U.S. Census Bureau |
Table 2 breaks down total tax revenue into its five major components. Among them, 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. revenue (mostly on cars and boats at the state level) was the only area where collections increased nominally nationwide. 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. es took the largest declines, down 23.1%.
Stable revenue is an important goal for state tax policy, and the year-to-year percentage change by source can give us a rough idea of the volatility of certain taxes. Table 3 illustrates the higher volatility associated with taxation of income, both corporate and individual. Corporate income has by far the greatest amount of volatility. 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. es tend to be more stable, although many states have made their sales taxes more volatile by excluding groceries and other large areas of consumer goods and services.
Although state tax revenue decreased significantly during fiscal year 2009, the decrease is almost exactly matched by earlier years of major increases. Over the last decade, adjusting for inflationInflation is when the general price of goods and services increases across the economy, reducing the purchasing power of a currency and the value of certain assets. The same paycheck covers less goods, services, and bills. It is sometimes referred to as a “hidden tax,” as it leaves taxpayers less well-off due to higher costs and “bracket creep,” while increasing the government’s spending power. , state tax revenues have increased by 6.1 percent. When controlling for population, tax revenues are down about one percent.
|
Table 3 |
||||||||||
|
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
2007 |
2008 |
2009 |
|
|
Total |
+ 4.3 |
+ 0.9 |
– 6.0 |
+ 0.3 |
+ 4.9 |
+ 6.1 |
+ 6.4 |
+ 2.8 |
– 0.7 |
– 8.5 |
|
Property |
– 9.1 |
– 8.1 |
– 8.8 |
+ 5.4 |
+ 6.1 |
– 4.1 |
+ 4.8 |
– 0.1 |
– 3.3 |
+ 4.1 |
|
General Sales |
+ 2.6 |
0.0 |
– 1.4 |
+ 0.5 |
+ 4.3 |
+ 4.0 |
+ 4.4 |
+ 0.9 |
– 2.7 |
– 5.0 |
|
Selective Sales |
+ 0.2 |
– 1.5 |
+ 3.4 |
+ 5.3 |
+ 4.0 |
+ 1.1 |
+ 5.1 |
+ 2.7 |
– 1.2 |
– 2.3 |
|
Individual Income |
+ 8.6 |
+ 3.9 |
– 13.0 |
– 4.3 |
+ 5.3 |
+ 8.5 |
+ 7.1 |
+ 5.1 |
0.9 |
– 12.1 |
|
Corporation Income |
+ 2.2 |
– 5.4 |
– 24.7 |
+ 9.9 |
+ 3.7 |
+ 21.3 |
+ 17.2 |
+ 8.0 |
– 8.0 |
– 22.6 |
|
Source: Data from U.S. Census Bureau and Bureau of Labor Statistics |