A 62% Top
Tax Rate? Democrats have said they only intend to restore the tax
rates that existed during the Clinton
years. In reality they're proposing rates like those under President Carter. By
STEPHEN MOORE
Media reports in recent weeks say that Senate Democrats
are considering a 3% surtax on income over $1 million
to raise federal revenues. This would come on top of the higher income tax
rates that President Obama has already proposed
through the cancellation of the Bush era tax-rate reductions. If the Democrats' millionaire surtax were to
happen—and were added to other tax increases already enacted last year and
other leading tax hike ideas on the table this year—this could leave the U.S.
with a combined federal and state top tax rate on earnings of 62%. That's more
than double the highest federal marginal rate of 28% when President Reagan left
office in 1989. Welcome back to the 1970s. Complete article at http://online.wsj.com/article/SB10001424052702304066504576343611464445594.html
States Where People Pay the Most
(and Least) in Taxes
by 24/7 Wall St. Staff Thursday, July 21,
2011
By
Charles B. Stockdale, Michael B. Sauter, Douglas A.
McIntyre
Different states tax their residences at different
levels. In some states, like New
Jersey, residents pay 12.2% as a percentage of their
income. In others, like Alaska,
they pay as little as 6.3%. 24/7
Wall St. reviewed a report recently released by
the Tax Foundation to identify the states where residents paid the most and
least in state and local taxes as a percent of income.
The amount varies widely as not all states have the same
sources of revenue. Some get more from business levies than others. Some have a
statewide sales tax. Some cities and towns tax property based on value, while
others don't. The issue of what people are taxed at
the state and local level is complex, among other reasons, because states often
receive a large amount of their tax receipts from sources other than the simple
payments of state residents.
The Tax Foundation report, "State-Local Tax Burdens
Fall in 2009 as Tax Revenues Shrink Faster than Income," shows the extent
of the differences. The most important reason for the variation is that some
states generate a significant amount of their tax revenue from businesses and
out-of-state residents, thereby minimizing the burden of taxes borne by residents.
Alaska, for example, gets 80% of tax receipts from such sources. State
residents get the equivalent of a subsidy from some of the world's largest oil
companies.
Conversely, states with low out-of-state business
receipts must collect a higher percent of taxes from their residents. This is
case in New Jersey,
which gets only 20% of its tax receipts from such sources. As a matter of fact,
most of the really large companies in the region are on the other side of New Jersey's northeast border in New York State,
thereby creating a higher burden on residents.
Mark Robyn, economist at the Tax Foundation and author of
the report, told 24/7 Wall St. that the "study accounts for the fact that
all states are able to some extent to shift their tax burden onto the taxpayers
of other states. Much of this 'tax exporting' happens naturally through no
special effort by policymakers, but some states have special sources of revenue
that allow them to export more of their burden to non-residents. For example, Nevada relies on tourism taxes, while Alaska,
Wyoming and North Dakota rely heavily on oil taxes that
are passed on to consumers around the country."
The Tax Foundation's report divides state tax revenue
into two categories: the amount contributed by residents, including income,
property and sales tax, and the amount contributed by non-residents, including
taxes paid by out-of-state businesses and taxes collected by in-state business
and paid by out-of-state residents. According to the Tax Foundation, because
residents effectively pay more as consumers and receive less as employees as a
result of corporate taxes, some business tax is also considered borne by the
resident. Taxes paid by out-of-state business to the state include the tax Alaska collects from
out-of-state oil companies to operate in the state. Taxes collected by in-state
business from out-of-state residents include tax on things like sales tax and
revenue from tourism.
In addition to the report from the Tax Foundation, 24/7 Wall St.
reviewed data from the Census Bureau, the Federation of Tax Administrators, and
the Mercatus
Center at George Mason
University.
The total tax burden an individual pays refers to the
percentage of state residents' income that goes to state and local taxes, and,
on top of that, what each person must pay the federal government. The equation
that puts all of those numbers together is complicated, and is among the
reasons that the debate over federal taxes is so heated. People often end up
with payments to several tax authorities. Their nominal federal tax rate may
mean very little when it comes to what must be paid to all applicable
government bodies at the end of each year. The amount that a person keeps from
each dollar that he or she earns can be affected more by local government needs
than those of the federal government.
These are the states where residents pay the most and
least in taxes.
The
Ten States with the Highest Tax Burdens
10.
Pennsylvania
Taxes paid by
residents as pct. of income: 10.1%
Total state and local taxes collected:
$109.7 billion
Pct. of total taxes paid by residents:
76.3%
Pct. of total taxes paid by
non-residents: 23.7%
Pennsylvania has among the
largest revenues in the country. The great majority of this money comes from
its residents. Approximately one third of state tax revenue comes from
individual income taxes. Another one half comes from various sales taxes. Pennsylvania also has
the highest state corporate tax rate in the country. There are a number of ways
the state could increase the amount of taxes it "exports" to
non-residents, however. The state can further expand its burgeoning gambling
industry. According to the Pennsylvania
Gaming Control Board, $81.4 million in tax revenue was generated by table games
in the most recent fiscal year. The state could also pass a tax on natural-gas
drilling, as it is currently the only state without one.
9.
Maine
Taxes paid by residents as pct. of
income: 10.1%
Total state and local taxes collected:
$10.7 billion
Pct. of total taxes paid by residents:
64.7%
Pct. of total taxes paid by
non-residents: 35.3%
For a state with one of the highest tax burdens on its
residents, Maine
has a relatively large percent of its total tax revenue come from out-of-state
residents and business, standing at more than 35%. Maine has the eighth lowest population and
the tenth lowest tax revenue. The state has middle-of-the-road taxes for
gasoline and alcohol, but at $2.00 per pack, it is tied with Michigan
and Alaska
for the 11th highest tobacco tax.
8.
Vermont
Taxes paid by residents as pct. of
income: 10.2%
Total state and local taxes collected:
$6.1 billion
Pct. of total taxes paid by residents:
62.1%
Pct. of total taxes paid by
non-residents: 37.9%
Vermont collects a
relatively large percentage of its tax revenue from non-residents. The state
has one of the largest shares of vacation homes in the country, and collects a
major portion of its property tax revenue from these homes, effectively taxing
residents of other states. Despite this, residents of Vermont have among the greatest tax burden
in the country. A large reason for this is the state's excise taxes, or taxes
on the sale of goods and services. According to a recent report from the Mercatus Center titled, "Excise Taxes in the
States," Vermont
collected the greatest amount in excise taxes per capita in 2010, $858. This
includes taxes on things such as tobacco, alcohol, insurance, and motor fuels.
7.
Minnesota
Taxes paid by residents as pct. of
income: 10.3%
Total state and local taxes collected:
$45.7 billion
Pct. of total taxes paid by residents:
75.5%
Pct. of total taxes paid by
non-residents: 24.5%
Less than 25% of Minnesota's
tax revenue comes from non-residents and businesses. The state only collects
average, or below average, rates on alcohol and tobacco, and has one of the
smallest tourism economies in the country. This means the state relies heavily
on income and property taxes from residents. Minnesota has the 21st largest
population in the country, but it collects the 12th most in tax revenue each
year. The state and local taxes collected per capita is the seventh highest in
the country, as is the tax burden as a percent of income.
6.
California
Taxes paid by residents as pct. of
income: 10.6%
Total state and local taxes collected:
$354 billion
Pct. of total taxes paid by residents:
82.5%
Pct. of total taxes paid by
non-residents: 17.5%
California is exceptional
in many ways when it comes to taxing its residents. The state has the highest
statewide sales tax in the country, currently 8.25%. It also has the highest
tax on gas, charging 46.6 cents per gallon. The state collects among the lowest
amount of taxes from non-residents and business out of all the states. But with
the lowest credit rating in the nation, according to S&P, an ongoing budget
problem, and a $10.8 billion deficit, one of the biggest in the country, the
state may want to change its approach.
5.
Rhode Island
Taxes paid by residents as pct. of
income: 10.7%
Total state and local taxes collected:
$9.4 billion
Pct. of total taxes paid by residents:
70.9%
Pct. of total taxes paid by
non-residents: 29.1%
Rhode Island is one of the
smallest states and has one of the smallest revenues. Despite this, residents'
tax burdens are among the highest. Each year, the average Rhode Islander pays
$671 in state "sin taxes," or taxes on things such as alcohol,
tobacco, and gambling. This is the second highest amount in the country, behind
only Delaware.
Part of the reason for this is that the state taxes each pack of cigarettes
$3.46, the second highest in the country. The state's tax burden is hurting
business as well. Rhode Island
has an exceptionally high corporate tax rate of 9% and was recently rated as
the worst state for business by CNBC.
4.
Wisconsin
Taxes paid by residents as pct. of
income: 11%
Total state and local taxes collected:
$41.7 billion
Pct. of total taxes paid by residents:
77.9%
Pct. of total taxes paid by
non-residents: 22.1%
According to the Milwaukee
Journal Sentinel, Wisconsin
relies more on income and property taxes for its revenue than most states. In
fact, both are approximately 25% higher than the national averages. The state
receives a smaller portion of federal money than most others, leaving little
room for this money to offset state spending. Worst still, taxes on industrial
property owners rank among the bottom half, and often the bottom third, of the
country, while residential taxes are among the greatest. According to a study
by the Institute on Taxation and Economic Policy, Wisconsin's
middle class pays a bigger share of government spending than any other state,
except for New York.
3.
Connecticut
Taxes paid by residents as pct. of
income: 12%
Total state and local taxes collected:
$33.3 billion
Pct. of total taxes paid by residents:
80.1%
Pct. of total taxes paid by
non-residents: 19.9%
The state with the highest per capita income in the
country collects more than $5,000 per resident on average, the most in the
country. It is the 30th most populous state in the U.S., but it collects the 19th most
in tax revenue. Less than 20% of Connecticut's
tax revenue comes from non-residents and business. According to the Tax
Foundation, the state ranks 47th in business environment, with a 7.5% tax on
businesses. The state's residents have a higher tax burden than all but two
other states. Part of the reason for this has to do with the fact that the
taxes Connecticut commuters pay to the empire
state counts as part of the Connecticut
tax burden.
2.
New York
Taxes paid by residents as pct. of
income: 12.1%
Total state and local taxes collected:
$243.9 billion
Pct. of total taxes paid by residents:
71.4%
Pct. of total taxes paid by
non-residents: 28.6%
New York places much of
its tax burden on residents from other states. Consider, for example, the
amount of state revenue derived from New
York City tourism, or those who commute to the city
for work. Despite this, state residents maintain the second largest tax burden
in the country. The state has one of the highest state and local tax
collections per capita, an average of $6,884. It has one of the highest
combined averages local and state sales tax rates — 8.3%. The Big Apple also
has a number of exceptionally high excise taxes, such as its $4.35 tax on each
pack of cigarettes, the highest rate in the country. Additionally, the state
has exceptionally high property tax rates. According to the Census Bureau, the
top ten counties in the U.S.
with the highest property taxes as a percentage of home values are all in New York.
1.
New Jersey
Taxes paid by residents as pct. of
income: 12.2%
Total state and local taxes collected:
$85.9 billion
Pct. of total taxes paid by residents:
79.5%
Pct. of total taxes paid by
non-residents: 20.5%
New Jersey residents have
a higher tax burden than those of any other state. As a percent of their
income, taxes in the Garden State were 12.2% in 2009, nearly double that of Alaska. Like Connecticut, much of this tax burden comes from state
residents who commute to New York City
and pay taxes there as well. This illustrates how a state resident contributes
to the tax base of multiple states. Although not reflected in the percent of
income residents pay in state and local taxes, it is nonetheless an additional
burden commuters have to bear. According to Tax Foundation, the state has the
third-worst environment for business in the country, with a corporate tax rate
of 9%. It also has an above-average sales tax, as well as one of the highest
rates in the country for cigarettes and liquor.
The Ten States with the Lowest Tax Burdens
10.
New Mexico
Taxes paid by residents as pct. of income:
8.4%
Total state and local taxes collected:
$16.9 billion
Pct. of total taxes paid by residents:
59%
Pct. of total taxes paid by
non-residents: 41%
The state and local tax burden on New Mexico residents is the tenth lowest in
the country. The state has a slightly below-average business climate, with a
corporate tax rate ranging from 4.8% to 7.6%. Gasoline taxes are quite low, but
excise taxes on alcohol and cigarettes are above average. The state tax on beer
is one of the highest in the country. A high percentage of state and local
revenues come from non-residents. This is usually the case with most states
with a low tax burden on its residents. Per capita, state residents pay just
$2,027, the sixth-lowest amount in the country.
9.
Louisiana
Taxes paid by residents as pct. of
income: 8.2%
Total state and local taxes collected:
$44.2 billion
Pct. of total taxes paid by residents:
54%
Pct. of total taxes paid by
non-residents: 46%
Despite having the fifth highest average state and local
sales tax rate, residents of Louisiana
have a relatively low tax burden. A leading reason for this is the simple fact
that, on average, residents pay one of the smallest amounts of total state and
local taxes in the country. According to the Tax Foundation, property taxes in
the state are $565.23 per capita, the fifth lowest amount among states. Louisiana also collects
$1.78 in federal spending for every dollar spent on federal taxes — the fourth
highest ratio. This rate of federal spending helps offset the need for higher state
revenue from taxes.
8.
South Carolina
Taxes paid by
residents as pct. of income: 8.1%
Total state and local taxes collected:
$35.4 billion
Pct. of total taxes paid by residents:
66%
Pct. of total taxes paid by
non-residents: 34%
Residents of South Carolina
pay the second smallest total amount in state and local taxes per person in the
country, behind only Mississippi.
The average person in the state pays $2,742 in taxes. Excise taxes are
extremely low: the state has the fifth lowest gasoline tax in the country and
the ninth lowest cigarette tax. The state also has relatively low property
taxes at both the state and local level.
7.
New Hampshire
Taxes paid by
residents as pct. of income: 8%
Total state and local taxes collected:
$9.6 billion
Pct. of total taxes paid by residents:
56.4%
Pct. of total taxes paid by
non-residents: 43.6%
New Hampshire "has no special revenue source from
non-residents, but the citizens' approval of limited government spending has
kept the tax burden low," according to the Tax Foundation, The state has a
flat 5% income tax rate that only applies to dividend and interest income, but,
effectively, no tax on wages, and as a result most residents don't have to pay
it. The state is also one of only five states that has
no sales tax. This causes many people from outside of the state to travel to New Hampshire to
purchase goods that are heavily taxed in their own states. Not all taxes in New Hampshire are low,
however. The state has the third highest property tax rate in the country.
6.
Texas
Taxes paid by residents as pct. of
income: 7.9%
Total state and local taxes collected:
$196.5 billion
Pct. of total taxes paid by residents:
63.4%
Pct. of total taxes paid by
non-residents: 36.6%
The population of Texas
is 30% larger than New York, but collects more
than 60% less in tax revenue than the Empire State.
The tax burden on residents is the sixth lowest in the country, at just 7.9% of
average income per resident. The biggest reason for this is that the state is
one of just six in the country to levy no personal income tax. Texas also has the 11th lowest sales tax, at 7.39%, and average or
below average rates on gasoline, cigarettes and alcohol.
5.
Wyoming
Taxes paid by residents as pct. of
income: 7.8%
Total state and local taxes collected:
$9.3 billion
Pct. of total taxes paid by residents:
29.9%
Pct. of total taxes paid by
non-residents: 70.1%
Besides Alaska, Wyoming has the greatest
percentage of its state revenue paid for by non-residents. This is because of
taxes on oil and coal that bring money in from out-of-state oil and mineral
companies. These taxes account for such a large percentage of Wyoming's revenue that the state does
without a corporate income tax. The state also has no individual income taxes.
Wyoming has an average state and local sales tax rate of 5.38%, one of the
lowest in the country.
4.
Tennessee
Taxes paid by residents as pct. of
income: 7.6%
Total state and local taxes collected:
$48 billion
Pct. of total taxes paid by residents:
63.7%
Pct. of total taxes paid by
non-residents: 36.3%
Tennessee has the
eleventh lowest per capita income in the country. Residents of the state pay
just $1,851 in taxes, the second lowest amount in the U.S. The
state's business climate is average, but other taxes are relatively low. The
sales tax of 7% is one of the highest in the country, but food purchases are
exempt from all but 1.5% of that. Dividend and interest income is taxed in the
state at a rate of 6%, but there is no other personal income tax levied. Tennessee collects no state-level
property tax, one of just a few to do so.
3.
South Dakota
Taxes paid by residents as pct. of
income: 7.6%
Total state and local taxes collected:
$5.2 billion
Pct. of total taxes paid by residents:
56%
Pct. of total taxes paid by
non-residents: 44%
Since 1977, South
Dakota's tax burden has dropped from 9.1% to 7.6%,
causing the state to change from the 15th least burdened state to the third
least burdened. The state has no corporate or individual income tax. It is
easier for South Dakota
to keep a low tax burden than many other states, however. According to the most
recent data available from the Tax Foundation, South Dakota receives $1.53 back
for every dollar collected in federal taxes, lessening the state's dependence
on state and local revenue.
2.
Nevada
Taxes paid by residents as pct. of
income: 7.5%
Total state and local taxes collected:
$20 billion
Pct. of total taxes paid by residents:
52.5%
Pct. of total taxes paid by
non-residents: 47.5%
Nevada has the
second-lowest tax burden in the country, with residents paying just 7.5% of
their income on state and local taxes. Nearly half of all state tax revenue
comes from non-residents. According to the Tax Association's State Business Tax
Climate Index, Nevada has one of the most favorable environments for business,
as it is one of the four states to levy no corporate tax at all. A significant
amount of the state's revenue comes from "sin taxes" on gambling,
alcohol, and tobacco, most of which comes from tourists. Sales tax is above the
national average, and the tax on gasoline is one of the highest in the country.
Counties are also allowed to levy additional gas taxes on top of the state.
1.
Alaska
Taxes paid by residents as pct. of
income: 6.3%
Total state and local taxes collected:
$18.8 billion
Pct. of total taxes paid by residents:
20.5%
Pct. of total taxes paid by
non-residents: 79.5%
Alaskans have the lowest tax burden of any state in the
country, paying just 6.3% of their income in state and local taxes. This is
over one full percentage point lower than the state with the second smallest
tax burden. According to the Tax Foundation, "Before the Trans-Alaska
pipeline was finished in 1977, taxpayers in Alaska bore the second-highest tax burden in
the country. By 1980, with oil tax revenue pouring in, Alaska repealed its personal income tax and
started sending out checks instead. The tax burden plummeted, and now Alaskans
are the least taxed." The state also levies no personal income tax or
sales tax.