State and Local Tax Collections and Related Employment

State and local governments literally had a head-on collision with the plunging economy during the recession and many locales were pressed just to remain solvent. Jobs were cut and services were either scaled back or eliminated.

  • Property values declined precipitously (and property tax collections fell)
  • Companies posted declining revenues, and in many instances losses and business failures (resulting in reduced corporate income tax collections)
  • People lost jobs, or were cut to part time (and hence personal income tax collections fell)
  • With fewer jobs and less income, retail sales shrank (and retail sales taxes dipped)

Good news is that in the 12 months ending March 2014, state and local tax collections rose 4.64 percent overall.

The following table is based on U.S. Census Bureau data detailing state and local tax collections and their respective sources. The four sources of taxes include property tax, individual income tax, corporate income tax and sales taxes.

Findings are revealing:

  • Total tax collections in each of the four categories are up in the latest four quarters when compared to same period a year earlier.
  • Property taxes are the largest source of tax revenue, representing 40 cents of every dollar of state and local taxes collected
  • While corporate taxes increased 6.39 percent year-over-year (the most of all the sources), they still remain just 4.4 percent of total state and local tax collections
  • Individual income tax collections make up the second largest source of tax revenues at 28.1 percent, just edging out sales taxes at 27.2 percent.

6-26-14 graph1

Not all states and localities have income or sales taxes. To view a state-by-state comparison of various tax burdens, and in many instances local information, refer to the analyses and research from the Tax Foundation, a non-profit research group in Washington, D.C. Some of their many reports include:

Sales Tax Rates http://taxfoundation.org/article/state-and-local-sales-tax-rates-2014

Personal Income Tax Rates http://taxfoundation.org/article/state-personal-income-tax-rates-and-brackets-2014-update

Corporate Income Tax Rates (top rate) http://taxfoundation.org/blog/top-state-corporate-income-tax-rates-2014

General State and Local Tax Data http://taxfoundation.org/article/facts-figures-2014-how-does-your-state-compare

State Tax Rates http://taxfoundation.org/tax-topics/state-taxes

What are state and local governments doing with the increased revenues? What they are not doing much of is hiring back the lost jobs from the recession.

The following graph shows the total state and local government employment. March 2013 saw 19.071 million total state and local government jobs while March 2014 counted 19.143 million – a gain of just 72,000 or 0.38 percent.

6-26-14 graph2

As of May 2014, the current number of state and local government jobs of 19.164 million equals the number as of March 2006. At the peak there were 19.8 million employees in state and local governments.

While many state and local governments face severe issues with underfunded pensions and high debt burdens, at least revenues in aggregate are rising faster than new hires.

Many governments, however, are just like people. We had a professor at Texas A&M that had a axiom that stated “When you get a raise, your are simply broke at a higher level.”

With some governments, just like people, no matter what their income level is, they spend it all.

Ted

Leave a Reply