March 1, 2000

State Tax Collections and Rates

J. Scott Moody

J. Scott Moody

Download Special Report No. 95

Special Report No. 95

Executive Summary State tax and fee collections grew by 7.1 percent between FY 1997 and FY 1998. This growth in tax collections is substantial even when adjusted for inflation, and it continues a decade-long trend.

The fastest growing category of state collections was estate and gift tax collections which rose 17.4 percent. Individual income taxes rose rapidly at an 11.1 percent clip in FY 1998. “Other taxes” were up 9.8 percent. This is a catch-all category that includes amusement sales, pari-mutuel sales, documentary and stock transfer taxes and miscellaneous taxes (mostly other sales taxes).

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J. Scott Moody

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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 gift tax is a tax on the transfer of property by a living individual, without payment or a valuable exchange in return. The donor, not the recipient of the gift, is typically liable for the tax.

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.