Thursday, February 24, 2011
Combined state and local tax burdens fell slightly in fiscal year 2009, as taxes shrank faster than income due largely to a slower economy, according to a new study by the Tax Foundation. Taxpayers in New York, New Jersey and Connecticut bore the highest state-local burdens in the country, while residents in South Dakota, Nevada and Alaska experienced the lowest.
The study estimates the average total tax burden for residents of each state, including both the in-state taxes they’re subject to as well as taxes they pay to other states, for example by virtue of working in, traveling to, or buying products from other states. This method takes the point of view of the individual taxpayer, counting all taxes they pay, no matter which state they pay them to. Many other tax measures focus only on state-by-state revenue totals and reflect the perspective of a state’s tax collectors.
The nation as a whole paid 9.8% of its income in state and local taxes, down slightly from 9.9% in 2008 and down significantly from 10.4% in 1977, the earliest year for which the Tax Foundation has done such estimates. While it is useful and informative to look at the national trend, burdens among the states can vary widely. Taxpayers in high-tax New Jersey, for example, pay almost twice the state-local tax rate as those in Alaska, the state with the lowest burden.