March 1, 1999

State Tax Collections and Rates

J. Scott Moody

J. Scott Moody

Download Special Report No. 85

Special Report No. 85

Executive Summary
State tax and fee collections grew by 5.9 percent between 1996 and 1997. The growth in inflation-adjusted tax collections continues a trend that began more than a decade ago.

The fastest growing category of state collections was estate and gift taxes which rose 11.4 percent. “Other taxes,” a catch-all category that includes amusement sales, pari-mutuel sales, documentary & stock transfer taxes and miscellaneous taxes (mostly other sales taxes), were up 11 percent . Individual income taxes rose more rapidly than usual at an 8.1 percent clip in 1997.

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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.

An 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.