State Reliance on Particular Taxes Provides a Peek at Revenue Vulnerability

5/1/2020

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By Mandy Rafool | May 1, 2020 | NCSL Fiscal Briefs

As the United States confronts COVID-19 with stay-home orders, economic activity has come to a screeching halt. The result, while beneficial to human health, will be devastating to state fiscal health. Job losses and reduced daily commerce have already drastically reduced state revenue streams, and the longer the economy stalls, the greater the revenue loss. The problem is particularly acute in states that rely heavily on sales and income taxes, which it turns out, is most states.

Nationally, nearly 70% of state revenues come from taxes on personal income and general sales. Personal income collections make up a larger share at 38%, but tax structures vary greatly across the states, with several states relying more heavily on one of these tax sources than others. State property taxes, severance taxes, or other taxes on corporations that in national aggregate appear insignificant, make up larger shares of tax revenue for some individual states.

Legend:
Individual Income
Corporation Net Income
General Sales and Gross Receipts
Selective Sales and Gross Receipts
License
Property
Other
 

Compared to other states, Oregon relied most heavily on personal income taxes in fiscal year 2018, with 70% of its total tax collections coming from that category. However, Oregon along wtih four other states—Alaska, Delaware, Montana and New Hampshire—does not have a general sales tax.

Likewise, the seven states—Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming—that don’t levy personal income taxes rely heavily on sales taxes. Florida generates 64% and Texas generates approximately 60% of total revenues from sales tax.

States also levy corporate income taxes, selective sales taxes on goods such as cigarettes and alcohol, statewide property taxes, license taxes and more, including severance taxes, estate taxes and real estate transfer taxes among others. These taxes make up a small share of state revenues in most states but are a significant revenue share in a handful of states. For example, property taxes account for just 1.6% nationally, but they account for 33% of tax revenue in Vermont.

Severance taxes, which are levied on the extraction of natural resources make up a more significant share of revenue in many resource-rich states such as Alaska and Wyoming. For example, severance tax collections make up over 56% of Alaska's total tax collections and nearly 30% in Wyoming.

Jurisdiction

Individual Income

Corporation Net Income

General Sales and Gross Receipts

Selective Sales and Gross Receipts

License

Property

Other

United States Average

38.0%

4.7%

30.8%

16.0%

5.6%

1.9%

3.0%

Alabama

35.4%

5.2%

25.2%

24.9%

4.7%

3.7%

0.9%

Alaska

0.0%

12.0%

0.0%

15.4%

8.5%

7.4%

56.7%

Arizona

27.9%

2.3%

47.2%

12.4%

3.0%

6.4%

0.8%

Arkansas

29.1%

4.0%

35.5%

13.6%

4.2%

12.3%

1.3%

California

54.4%

7.1%

20.7%

10.1%

6.0%

1.6%

0.1%

Colorado

50.7%

4.5%

21.7%

16.9%

5.5%

0.0%

0.7%

Connecticut

51.0%

4.1%

23.7%

16.6%

2.5%

0.0%

2.1%

Delaware

39.2%

6.0%

0.0%

13.9%

37.3%

0.0%

3.6%

Florida

0.0%

5.3%

64.3%

19.4%

4.6%

0.0%

6.4%

Georgia

49.3%

4.3%

25.2%

13.5%

3.0%

3.9%

0.7%

Hawaii

31.5%

1.9%

45.7%

15.6%

3.6%

0.0%

1.7%

Idaho

37.9%

5.0%

36.9%

12.5%

7.6%

0.0%

0.2%

Illinois

38.4%

6.5%

28.4%

18.5%

6.9%

0.1%

1.2%

Indiana

30.0%

3.6%

40.2%

22.3%

3.9%

0.1%

0.0%

Iowa

38.6%

4.4%

32.5%

13.9%

9.5%

0.0%

1.0%

Kansas

35.8%

4.6%

34.6%

12.5%

4.5%

7.5%

0.5%

Kentucky

37.3%

4.2%

29.9%

17.5%

4.1%

5.5%

1.4%

Louisiana

28.6%

3.2%

37.4%

23.0%

3.5%

0.5%

3.8%

Maine

36.4%

4.2%

34.7%

16.4%

6.4%

0.9%

1.1%

Maryland

42.4%

4.6%

21.0%

21.6%

3.8%

3.6%

2.9%

Massachusetts

54.9%

8.1%

21.9%

8.5%

3.9%

0.0%

2.6%

Michigan

33.6%

3.6%

32.3%

15.9%

6.4%

7.1%

1.2%

Minnesota

44.5%

5.1%

21.8%

17.9%

5.5%

3.1%

2.1%

Mississippi

23.5%

5.5%

45.1%

18.7%

6.2%

0.4%

0.6%

Missouri

50.0%

2.6%

28.3%

14.2%

4.6%

0.3%

0.1%

Montana

44.2%

6.0%

0.0%

21.5%

12.0%

10.0%

6.4%

Nebraska

43.8%

5.8%

35.2%

11.2%

3.6%

0.0%

0.4%

Nevada

0.0%

0.0%

55.6%

24.4%

7.2%

3.5%

9.3%

New Hampshire

3.6%

27.0%

0.0%

35.1%

14.9%

14.0%

5.3%

New Jersey

42.5%

6.3%

29.6%

14.0%

4.4%

0.0%

3.2%

New Mexico

22.1%

1.6%

36.6%

14.3%

5.6%

1.5%

18.4%

New York

59.6%

4.1%

16.7%

13.1%

2.0%

0.0%

4.5%

North Carolina

45.3%

2.7%

28.8%

15.1%

7.9%

0.0%

0.3%

North Dakota

8.7%

2.6%

21.7%

11.5%

5.1%

0.1%

50.3%

Ohio

29.9%

0.0%

41.7%

20.4%

7.8%

0.0%

0.2%

Oklahoma

36.5%

2.5%

28.5%

14.0%

11.0%

0.0%

7.5%

Oregon

70.2%

6.4%

0.0%

13.1%

8.6%

0.2%

1.5%

Pennsylvania

31.4%

6.1%

26.8%

24.8%

6.7%

0.1%

4.0%

Rhode Island

38.2%

3.4%

30.1%

18.2%

2.9%

0.1%

7.1%

South Carolina

42.0%

4.0%

31.3%

15.6%

5.5%

0.4%

1.2%

South Dakota

0.0%

1.7%

57.6%

25.1%

15.2%

0.0%

0.4%

Tennessee

1.7%

11.5%

52.3%

20.1%

12.4%

0.0%

1.9%

Texas

0.0%

0.0%

59.9%

25.4%

6.0%

0.0%

8.7%

Utah

49.7%

5.0%

28.0%

12.7%

4.2%

0.0%

0.5%

Vermont

24.9%

3.4%

12.1%

21.2%

3.8%

32.5%

2.0%

Virginia

60.1%

3.7%

17.4%

12.8%

3.7%

0.1%

2.2%

Washington

0.0%

0.0%

58.9%

17.6%

7.8%

10.4%

5.3%

West Virginia

36.0%

2.0%

24.2%

26.2%

3.6%

0.1%

7.8%

Wisconsin

43.5%

4.9%

29.3%

14.7%

6.3%

0.9%

0.5%

Wyoming

0.0%

0.0%

37.5%

9.4%

10.2%

13.6%

29.2%

Source: US Census, FY 2018 tax collections

 

Mandy Rafool is the group director of the Fiscal Affairs Program.

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