Taxable Dividends Vary Dramatically by State

January 16, 2003

Fiscal Fact No. 3

Contrary to claims that the Administration’s proposal to eliminate the double tax on dividend income will benefit only a handful of Americans, the latest IRS data show that more than one quarter of all tax returns included dividend income in 2000. That’s 34 million tax returns, representing over 69 million people who claimed $144.6 billion in dividend income.

The percentage of taxpayers claiming dividend income varies greatly by state. Connecticut and New Jersey had the highest percentages of taxpayers claiming taxable dividends: 37.3% and 35.7% respectively. Other states with nearly one-third of their taxpayers claiming dividend income were Colorado (30.4%), Massachusetts (32.4%), Minnesota (32.0%), New Hampshire (30.0%), New York (30.4%), Pennsylvania (30.4%), and Wisconsin (30.8%).

California led the nation in the total amount of dividends claimed in 2000: $18.7 billion. New York was second with $12.3 billion, followed closely by Florida with $11.9 billion. Illinois and New Jersey rounded out the top five with taxpayers claiming $7.1 billion and $5.9 billion in dividends respectively.

Based upon these 2000 returns, Tax Foundation economists have estimated how much each state’s taxpayers would save if dividends are exempted from taxation as the President proposes (see Table below). If dividend income in 2003 matches the 2000 level, taxpayers would save a total of $20.2 billion nationwide – an average of $593 among those tax returns.

The states that would receive the most tax relief per taxpayer include: The District of Columbia ($1,221 per-taxpayer); Nevada ($898); Connecticut ($886); Wyoming ($885); and Florida ($881).

Year 2000 Year 2003
State Returns With Dividend Income Percent of Returns w/ Dividend Income Total Dividend Income ($thousands) Estimated Tax Relief from Dividend Tax Exclusion ($thousands) Savings Per Tax Return with Dividend Income
United States 34,099,783 26.2% $144,673,140 $20,233,057 $593
Alabama 344,337 18.1% $1,301,348 $152,886 $444
Alaska 93,502 28.4% $255,374 $33,965 $363
Arizona 562,837 26.1% $2,422,650 $312,540 $555
Arkansas 209,751 18.8% $1,040,068 $119,926 $572
California 3,909,981 26.3% $18,760,934 $2,859,955 $731
Colorado 636,620 30.4% $2,505,211 $364,286 $572
Connecticut 622,976 37.3% $3,184,709 $552,192 $886
Delaware 109,609 29.0% $378,169 $50,998 $465
Florida 1,973,470 26.3% $11,892,958 $1,738,382 $881
Georgia 800,241 22.0% $3,282,934 $433,018 $541
Hawaii 161,773 28.3% $171,333 $20,128 $124
Idaho 134,351 24.0% $463,083 $53,955 $402
Illinois 1,701,830 29.4% $7,146,114 $1,050,112 $617
Indiana 643,443 22.7% $2,147,396 $265,375 $412
Iowa 397,577 29.4% $1,105,279 $127,000 $319
Kansas 339,549 27.8% $1,204,027 $159,800 $471
Kentucky 346,700 19.8% $1,276,911 $147,949 $427
Louisiana 345,541 18.4% $1,251,115 $150,731 $436
Maine 152,160 25.1% $596,961 $69,458 $456
Maryland 733,391 28.6% $3,028,570 $407,994 $556
Mass. 1,008,963 32.4% $4,798,545 $802,751 $796
Michigan 1,262,007 27.3% $4,691,541 $616,549 $489
Minnesota 763,582 32.0% $2,387,314 $316,617 $415
Mississippi 173,473 14.8% $590,616 $63,324 $365
Missouri 665,460 25.9% $2,433,067 $308,133 $463
Montana 124,028 29.2% $384,355 $42,061 $339
Nebraska 232,926 28.8% $700,433 $85,559 $367
Nevada 197,671 20.7% $1,227,916 $177,455 $898
New Hampshire 191,720 30.0% $824,461 $122,117 $637
New Jersey 1,453,494 35.7% $5,971,989 $943,644 $649
New Mexico 140,281 19.3% $483,089 $50,021 $357
New York 2,610,955 30.4% $12,347,427 $1,895,482 $726
North Carolina 835,750 23.0% $3,208,042 $392,890 $470
North Dakota 83,308 27.5% $190,172 $21,259 $255
Ohio 1,438,884 25.8% $5,168,271 $636,376 $442
Oklahoma 279,477 19.1% $906,470 $106,374 $381
Oregon 428,656 27.4% $1,643,203 $204,588 $477
Pennsylvania 1,763,134 30.4% $7,146,042 $959,074 $544
Rhode Island 135,533 27.4% $493,346 $63,974 $472
South Carolina 355,681 19.7% $1,394,123 $158,838 $447
South Dakota 94,155 26.5% $276,372 $34,278 $364
Tennessee 474,633 18.5% $1,834,325 $233,708 $492
Texas 1,809,168 20.0% $7,937,488 $1,157,181 $640
Utah 193,861 20.6% $651,022 $72,226 $373
Vermont 89,460 29.9% $391,860 $47,600 $532
Virginia 958,021 28.7% $3,768,585 $516,530 $539
Washington 790,470 28.5% $3,431,490 $521,340 $660
West Virginia 138,893 18.5% $469,918 $51,164 $368
Wisconsin 800,505 30.8% $2,502,234 $307,761 $384
Wyoming 64,822 27.6% $385,764 $57,337 $885
D.C. 67,551 24.2% $525,235 $82,469 $1,221

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