Another Top-10 List — States With Greatest (and Least) Reliance on Sales Taxes

There are only two things that are inevitable – death and taxes.  Good news is this blog is about the latter of the two.  Just as there are a number of things that can impact health, there are also multiple taxes that cannot be avoided.  While property taxes are the primary revenue source for state and local revenues on average nationwide  (making up 31.1 percent of average state revenues in 2015 according to the Tax Foundation) sales taxes are tied with individual income taxes for second place, each providing 23.5 percent of the total revenues at the state and local level.

While all states have property taxes in place, the same is not true for sales or income taxes.   Four states; Delaware, Montana, New Hampshire and Oregon have no sales taxes, and seven states zero individual income taxes; Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming.  States still require revenues, so not having one source of taxes puts the burden on other sources.  Texas, for example, while having no income taxes, does have aggressively high property taxes which account for 42.0 percent of state and local tax revenues compared to an average 31.1 percent for all states.  Alaska relies on property taxes for 57.2 percent of state and local revenues.   Washington, with no income tax revenues, places their burden on sales taxes, which make up almost one-half of all state and local revenues (45.9 percent).

The following table lists the states with the greatest percentage of state and local tax revenues generated by sales taxes. Following this are the states with the lowest percentage of revenues from sales taxes – including four that have zero.  In addition, included are the per capita sales tax collections per state.   Just because a state ranks high in percentage of revenues from sales taxes, there is not a perfect correlation to the amount of taxes collected per capita.

The two tables below show the greatest and least sales taxes collected per capita.

The following table shows these data for all 50 states.

To see individual data for state and local tax revenues arising from all sources from the Tax Foundation click https://taxfoundation.org/facts-figures-2018/

Are sales taxes a good route to fund government?  Some say yes, since everyone pays and therefore contributes to funding state and local government – unlike income taxes which for some can be avoided given standard deductions and other exemptions or others having no income.

Sales taxes, however, are regressive, that is, they are a greater burden on those with lower incomes.   Lower income people have to spend every dollar of their income, (other than rent) on goods typically having sales taxes.   Higher income individuals do not consume every dollar earned, and thus pay a lower overall percentage of their income on income taxes.

Ted

Leave a Reply