October 9, 2009 Where Do State and Local Governments Get Their Tax Revenue? Gerald Prante Gerald Prante Print this page Subscribe Support our work Download Fiscal Fact No. 194 Fiscal Fact No. 194 Introduction Newly released Census data show how different the 50 states’ fiscal systems are. Their reliance on various sources of tax revenue differs widely because they have different endowed resources and policy priorities. These differences are reflected in state-local tax collections no matter how large or small a fraction of the residents’ income state and local governments have decided to take in taxes. States heavily endowed with valuable natural resources, such as Alaska and Wyoming, will usually exploit those tax revenue sources, which they can do without too much fear of driving the activity out of state, given that those natural resources are largely immobile. States seeking a more progressive tax code tend to rely heavily on individual income taxes, all else equal. Tables 1-4 are “top ten” tables, highlighting the states that rely heavily on each of four major categories: property taxes, individual income taxes, general and selective sales taxes,[1] and “licenses and other taxes.”[2] The data are the latest available for states and localities, fiscal year 2007, which stretched from July 1, 2006 to June 30, 2007. Combined state-local data is best for interstate comparison because what some states accomplish with local taxes is accomplished in other states with state-level taxes. Table 1 Which Ten States Rely Most on Property Taxes? State Fraction of Tax Revenue Coming from Property Taxes New Hampshire 61.3% Vermont 42.1% New Jersey 41.7% Texas 41.6% Rhode Island 41.1% Michigan 39.3% Connecticut 38.2% Illinois 37.1% Florida 36.8% Wyoming 36.8% Note: Includes residential and commercial real estate (mostly local revenue) as well as personal property taxes on cars, boats, etc. (mostly state revenue). Source: Tax Foundation calculations based on data from Census Bureau’s government finance data for state and local governments during fiscal year 2007. Table 2 Which Ten States Rely Most on General and Selective Sales Taxes? State Fraction of Tax Revenue Coming from Sales Taxes (General + Selective) Washington 62.1% Nevada 58.2% Tennessee 56.8% South Dakota 54.1% Arkansas 53.2% Louisiana 53.0% Hawaii 51.7% Florida 49.0% Arizona 48.4% Alabama 47.8% Note: The major selective sales taxes are levied on motor fuel, tobacco, insurance premiums, public utilities (power, telephone service, etc.), amusements and alcoholic beverages. Source: Tax Foundation calculations based on data from Census Bureau’s government finance data for state and local governments during fiscal year 2007. Table 3 Which Ten States Rely Most on Individual Income Taxes? State Fraction of Tax Revenue Coming from Individual Income Taxes Oregon 44.1% Maryland 39.7% Massachusetts 35.6% North Carolina 32.7% New York 31.8% Virginia 31.6% California 30.8% Minnesota 30.5% Connecticut 30.0% Ohio 29.9% Note: States and localities generally lump wages, dividends, interest and capital gains together when applying their individual income taxes. Source: Tax Foundation calculations based on data from Census Bureau’s government finance data for state and local governments during fiscal year 2007. Table 4 Which States Rely Most on Licenses and Other Taxes? State Fraction of Tax Revenue Coming from Licenses & Other Taxes Alaska 52.6% Delaware 34.1% Wyoming 30.1% North Dakota 20.7% Montana 18.8% Oklahoma 17.8% New Mexico 17.5% Nevada 14.3% Oregon 12.6% West Virginia 12.4% Note: In license category, taxes are imposed on motor vehicle licenses, business or corporation licenses, and hunting or fishing licenses. In category of other taxes, major revenue sources are severance taxes (natural resources), stock transfer taxes, and estate/gift taxes. Source: Tax Foundation calculations based on data from Census Bureau’s government finance data for state and local governments during fiscal year 2007. Table 5 State and Local Tax Revenue by Source, Fiscal Year 2007 State Property Taxes General Sales Taxes Selective Sales Taxes Individual Income Taxes Corporate Income Taxes Licenses and Other Taxes United States 30.1% 23.5% 10.9% 22.6% 4.7% 8.2% Alabama 15.5% 29.9% 17.9% 22.7% 3.7% 10.2% Alaska 20.9% 3.7% 6.3% 0.0% 16.5% 52.6% Arizona 26.7% 40.1% 8.3% 16.1% 4.2% 4.6% Arkansas 14.6% 41.3% 11.9% 23.7% 4.0% 4.4% California 24.2% 24.2% 7.2% 30.8% 6.5% 7.2% Colorado 30.4% 27.1% 8.2% 25.8% 2.7% 5.9% Connecticut 38.2% 14.4% 9.2% 30.0% 3.9% 4.3% Delaware 15.6% 0.0% 12.7% 29.3% 8.3% 34.1% Florida 36.8% 33.2% 15.8% 0.0% 3.3% 11.0% Georgia 28.8% 29.9% 8.6% 26.5% 3.0% 3.2% Hawaii 17.3% 38.9% 12.8% 23.8% 1.5% 5.6% Idaho 23.5% 26.8% 8.9% 29.6% 3.9% 7.3% Illinois 37.1% 16.6% 17.2% 17.1% 5.3% 6.6% Indiana 29.1% 25.7% 11.5% 24.7% 4.7% 4.3% Iowa 33.1% 21.2% 10.4% 25.1% 3.0% 7.2% Kansas 30.5% 26.6% 8.9% 24.2% 4.6% 5.3% Kentucky 18.9% 20.6% 16.5% 29.5% 8.1% 6.5% Louisiana 14.8% 40.0% 13.0% 18.3% 4.3% 9.6% Maine 36.5% 18.7% 11.3% 24.2% 3.3% 6.0% Maryland 24.2% 12.7% 10.6% 39.7% 2.9% 9.8% Massachusetts 34.4% 12.7% 6.5% 35.6% 6.5% 4.3% Michigan 39.3% 21.5% 10.5% 18.7% 4.7% 5.3% Minnesota 25.8% 19.2% 12.6% 30.5% 5.1% 6.8% Mississippi 25.3% 36.1% 11.7% 16.0% 4.3% 6.5% Missouri 27.4% 26.2% 11.4% 27.0% 2.0% 6.1% Montana 33.8% 0.0% 16.4% 25.5% 5.5% 18.8% Nebraska 33.5% 24.3% 8.0% 23.2% 3.0% 8.0% Nevada 27.5% 33.8% 24.4% 0.0% 0.0% 14.3% New Hampshire 61.3% 0.0% 15.5% 2.3% 12.6% 8.3% New Jersey 41.7% 16.8% 7.2% 22.7% 5.6% 6.0% New Mexico 13.6% 36.1% 10.9% 15.8% 6.1% 17.5% New York 28.4% 16.4% 7.8% 31.8% 9.3% 6.3% North Carolina 22.5% 21.9% 12.1% 32.7% 4.8% 6.0% North Dakota 26.8% 21.9% 13.3% 12.1% 5.3% 20.7% Ohio 29.0% 20.5% 10.9% 29.9% 2.6% 7.2% Oklahoma 16.2% 28.5% 9.7% 23.2% 4.6% 17.8% Oregon 31.1% 0.0% 8.6% 44.1% 3.6% 12.6% Pennsylvania 29.6% 17.0% 11.6% 25.5% 4.3% 12.0% Rhode Island 41.1% 18.3% 10.3% 22.8% 3.7% 3.9% South Carolina 31.1% 24.3% 10.9% 23.6% 2.3% 7.9% South Dakota 34.2% 40.6% 13.5% 0.0% 3.2% 8.5% Tennessee 24.2% 45.7% 11.1% 1.5% 6.1% 11.5% Texas 41.6% 30.8% 16.0% 0.0% 0.0% 11.6% Utah 22.9% 28.7% 10.3% 28.7% 4.5% 4.9% Vermont 42.1% 11.5% 17.7% 19.9% 2.8% 6.0% Virginia 31.0% 14.5% 11.9% 31.6% 2.7% 8.3% Washington 26.8% 47.5% 14.6% 0.0% 0.0% 11.1% West Virginia 18.7% 18.4% 19.3% 22.3% 8.9% 12.4% Wisconsin 36.0% 19.0% 8.4% 27.1% 3.9% 5.5% Wyoming 36.8% 28.3% 4.8% 0.0% 0.0% 30.1% D.C. 29.3% 16.1% 9.4% 25.3% 8.1% 11.8% Notes: Property tax includes residential and commercial real estate (mostly local revenue) as well as personal property taxes on cars, boats, etc. (mostly state revenue). The major selective sales taxes are levied on motor fuel, tobacco, insurance premiums, public utilities (power, telephone service, etc.), amusements and alcoholic beverages. State and local governments generally lump wages, dividends, interest and capital gains together when applying their individual income taxes. In license category, taxes are imposed on motor vehicle licenses, business or corporation licenses, and hunting or fishing licenses. In category of other taxes, major revenue sources are severance taxes (natural resources), stock transfer taxes, and estate/gift taxes. Source: Tax Foundation calculations based on data from Census Bureau’s government finance data for state and local governments during fiscal year 2007. [1] The major selective sales taxes are levied on motor fuel, tobacco, insurance premiums, public utilities (power, telephone service, etc.), amusements and alcoholic beverages. [2] Major fees are imposed on motor vehicle licenses, business or corporation licenses, and hunting or fishing licenses. Major tax sources are severance taxes (natural resources), stock transfer taxes, and estate/gift taxes. Topics Center for State Tax Policy Business Taxes Corporate Income Taxes Estate, Inheritance and Gift Taxes Excise Taxes Gross Receipts and Margin Taxes Individual Capital Gains and Dividends Taxes Individual Income and Payroll Taxes Property Taxes Research Sales Taxes Unemployment Insurance (UI) Taxes
