The nonpartisan Tax Foundation released its Annual State-Local Tax Burdens report on Wednesday showing results from the 2011 fiscal year. The main findings include an overall decrease in state-local tax burdens. Americans paid 9.8% of their collective income in state and local taxes in 2011. Depending on the state, the burden ranged from 6.9% to 12.6%.
The report released highlights major burdens in many states. In states like New York, New Jersey and Connecticut, the taxpayer forgoes 11.9% of their income or higher. These states have topped of the list since 2005. These states also find themselves at the top of the lists for most liberal states in the United States and worst-run states in the United States.
Although there has been a decrease in tax burdens from 2010 to 2011, states like Connecticut have seen an overall rise in their tax burden since 1977. Despite the fact that a taxpayer in these states will never see a significant amount of their income, New York, New Jersey, and Connecticut are each still experiencing major budget shortfalls. The heavy tax burden has not translated into lower deficits and smart budgets.
The states with the lowest state-local tax burdens include Wyoming, Alaska, and South Dakota. Taxpayers forgo 6.9%, 7.0%, and 7.1% of their income in each state respectively. These states, along with many of the other least-burdened states, do not have a tax on wage income. Places like Alaska and Wyoming also have the advantage of being resource-rich.
By taking advantage of these resources such as oil, residents are relieved from a hefty tax burden. The same advantages are seen in states with major tourist destinations through tax exportation. This report by the Tax Foundation acknowledges this differentiation, unlike the Census Bureau, making its conclusions unique and potentially more accurate when measuring tax burdens.
Since 1977, all three of these least-burdened states have experienced major decreases in tax burdens. Unlike the states with the most burdensome tax policies, Wyoming, Alaska, and South Dakota are some of the most conservative states in the United States as well as some of the best run states. Notably, none of these states are facing major budget shortfalls. The taxpayers and residents of Wyoming, Alaska, and South Dakota are facing a low burden, while reaping the benefits of a well-run and well budgeted state government.
Overall, the Tax Foundation’s Annual State-Local Tax Burdens report offers important insight into burdens imposed on certain state’s residents. The report takes into account tax collections that cross state borders giving accurate accounts of the burdens faced by individuals. States that burden their residents the most are facing budget problems that high tax revenue has yet to fix. Conversely, states with a low burden simultaneously experience well run state governments and budgets.