Tax Policies

Tax Policies in most states rely on the use of personal income and general sales taxes, which produce more than two-thirds of all state tax revenue. Each tax has advantages and disadvantages, discussed in the Tax Policy Handbook for State Legislators. Additional state revenue comes from a variety of fees and other charges. Policy principles that policymakers might use when considering the state tax and user fee mix are reviewed in Principles of a High-Quality State Revenue System and The Appropriate Role of User Charges in State and Local Finance.  Additionally, the article series, Tax Backgrounders,  provides a data-driven overview of state tax systems.  They were designed with legislators of all tax policy backgrounds in mind.  These briefs can help develop a general understanding of state taxes for legislators with little experience on the subject.  They also provice a convenient reference point or organized statistices on state taxes and economies and resources for further research.  This may be particularly useful for state finance analysts with an interest in the details of state finance.

Property taxes are the mainstay of local governments and provide the major source of funding for schools. Each state's property tax system is different, with variations in the types of property taxable, and the ways taxes are levied. Policymakers can find more about these systems in A Guide to Property Taxes: An Overview. In spite of their importance in state-local revenue systems, property taxes are unpopular, and states provide property tax relief to citizens in a number of different ways. The types of relief have increased in the past few years, as discussed in A Guide to Property Taxes: Property Tax Relief. During the past decade, the relationship between property taxes and state and local government services has changed significantly. Years of surplus revenue, coupled with voter dislike of the property tax, has resulted in major property tax cuts and has led states to shoulder a growing share of education costs. In addition, a number of states rely heavily on businesses and personal property to provide a large portion of property tax revenue. Sometimes, these taxes are not very straightforward or obvious. A Guide to Property Taxes: The Role of Property Taxes in State and Local Finances examines some of these issues.

State Tax and Expenditure Limits (TELs) are designed to curtail growth in government spending by placing constitutional or statutory restrictions on the amount a government entity can spend or tax its citizens. Traditionally, state TELs have limited revenues, expenditures or appropriations. Questions regarding the effectiveness of these traditional limits have led to additional measures such as voter approval requirements or legislative supermajority requirements that also limit state revenue and expenditure options. The restrictiveness of all these limits varies considerably depending upon their design.

Information on Tax Policy (General)

Dedicating or Earmarking Taxes

  • A new Earmarking State Taxes report is now available and provides a detailed analysis of the extent and use of dedicated tax revenue in the states. (August 2008).

Local Governments: State Aid and Local Option Taxes

Personal Income Taxes

Property Taxes

  • A Guide to Property Taxes: A Primer, Property Tax Relief, andThe Role of Property Taxes in State and Local Finance (2002-2004)
  • See rankings of state-local property taxes.

Rankings of state and state-local revenues and expenditures

  • State-Local Tax and Expenditure Rankings ranks, per capita and per $100 of personal income, state-local taxes and expenditures in these categories:
    • Personal Income Tax
    • Corporate Income Tax
    • Property Tax
    • General Sales Tax
    • Selective Sales Tax
    • Revenues
    • Taxes
    • Expenditures

Retirement and Pensions Issues  

Severance Taxes

State-Tribal Tax Matters

Supermajority

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Tax Incentives

Taxpayers' Bill of Rights (TABOR)

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Tax and Expenditure Limits

Tourism-related Taxes

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Trigger Mechanisms

User Charges or User Fees

 


Updated November 2008.
Email statefiscal-info@ncsl.org for more information. 

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