Taxes and Government Spending - State And Local Taxes

In the United States, many states and local government entities levy taxes, including taxes on corporate income, personal income, and property. In addition, most states charge sales taxes on retail transactions. According to the U.S. Census Bureau in Federal, State, and Local Governments: 2003 State Government Tax Collections (February 2005), state revenue from taxes equaled $549 billion in 2003, which amounted to $1,891.57 per person. States with large populations, such as California, New York, Texas, Florida, and Pennsylvania, collected the most taxes in 2003, but Hawaii, Connecticut, Minnesota, Delaware, and Vermont had the highest taxes per capita. Table 8.5 ranks states by total taxes and per capita amount during 2003. Table 8.6 shows taxes and other sources of revenue for the nation's largest cities in 2001.

Income Taxes

As of 2004 forty-three states and the District of Columbia imposed income taxes. The states that did not tax income were Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. Two additional states, Tennessee and

TABLE 8.5

States ranked by total taxes and per capita amount, 2003
(Amounts are in thousands. Per capita amounts are in dollars)
Total tax			Total tax per capita
Rank	State	Amount	Rank	State	Amount
SOURCE: "States Ranked by Total Taxes and Per Capita Amount: 2003," in Federal, State, and Local Governments: 2003 State Government Tax Collections, U.S. Census Bureau, February 2005, http://www.census.gov/govs/statetax/03staxrank.html (accessed March 10, 2005)
	United States	546,694,430		United States	1,883.56
1	California	79,198,255	1	Hawaii	2,837.70
2	New York	40,558,349	2	Connecticut	2,730.02
3	Texas	29,098,584	3	Minnesota	2,649.48
4	Florida	26,905,405	4	Delaware	2,601.60
5	Pennsylvania	23,187,248	5	Vermont	2,518.11
6	Michigan	22,748,159	6	Wyoming	2,429.45
7	Illinois	22,148,339	7	Massachusetts	2,426.68
8	Ohio	20,651,597	8	New Jersey	2,307.97
9	New Jersey	19,936,266	9	Michigan	2,256.76
10	North Carolina	15,848,650	10	California	2,231.94
11	Massachusetts	15,610,825	11	Wisconsin	2,226.76
12	Georgia	13,411,632	12	Washington	2,113.88
13	Minnesota	13,403,699	13	New York	2,113.51
14	Virginia	12,969,165	14	Rhode Island	2,097.26
15	Washington	12,960,220	15	Maine	2,065.29
16	Wisconsin	12,184,852	16	Kentucky	2,021.56
17	Indiana	11,216,456	17	Maryland	1,993.16
18	Maryland	10,980,324	18	West Virginia	1,983.08
19	Connecticut	9,508,645	19	Nebraska	1,925.07
20	Tennessee	8,811,612	20	New Mexico	1,923.82
21	Arizona	8,691,761	21	Arkansas	1,887.58
22	Missouri	8,627,396	22	North Carolina	1,885.17
23	Kentucky	8,318,707	23	Pennsylvania	1,875.23
24	Louisiana	7,447,533	24	North Dakota	1,857.61
25	Colorado	6,636,190	25	Nevada	1,842.54
26	Alabama	6,416,351	26	Kansas	1,838.62
27	South Carolina	6,353,115	27	Indiana	1,810.27
28	Oklahoma	5,905,884	28	Ohio	1,805.84
29	Oregon	5,701,691	29	Virginia	1,755.91
30	Arkansas	5,145,554	30	Illinois	1,750.30
31	Iowa	5,059,449	31	Iowa	1,718.56
32	Kansas	5,008,411	32	Mississippi	1,717.25
33	Mississippi	4,947,396	33	Idaho	1,716.21
34	Nevada	4,129,137	34	Oklahoma	1,681.63
35	Utah	3,950,720	35	Utah	1,680.44
36	New Mexico	3,607,156	36	Louisiana	1,656.48
37	West Virginia	3,589,366	37	Alaska	1,647.64
38	Hawaii	3,569,824	38	Montana	1,619.85
39	Nebraska	3,347,700	39	Oregon	1,601.60
40	Maine	2,697,275	40	Florida	1,580.90
41	Idaho	2,344,344	41	Arizona	1,557.38
42	Rhode Island	2,256,654	42	Georgia	1,544.23
43	Delaware	2,125,504	43	South Carolina	1,531.98
44	New Hampshire	1,959,211	44	New Hampshire	1,521.13
45	Vermont	1,558,712	45	Missouri	1,512.52
46	Montana	1,487,019	46	Tennessee	1,508.32
47	Wyoming	1,217,154	47	Colorado	1,458.18
48	North Dakota	1,177,727	48	Alabama	1,425.54
49	Alaska	1,069,319	49	South Dakota	1,321.84
50	South Dakota	1,009,888	50	Texas	1,315.55

New Hampshire, taxed only personal income derived from dividends and interest, according to the Federation of Tax Administrators (FTA; www.taxadmin.org). In 2004 several states imposed a single rate for all income levels, including Colorado (4.63%), Illinois (3.0%), Indiana (3.4%), Massachusetts (5.3%), Michigan (4.0%), Pennsylvania (3.07%), and Rhode Island (25% of federal tax liability). Many states had devised tax codes based on income brackets that varied in number from two in Connecticut to ten in Missouri and Montana. According to the FTA, the highest income tax rates among the states in 2004 included 11% on income over $76,199 in Montana and 9.5% on income over $30,000 in the District of Columbia. According to the U.S. Census Bureau in Federal, State, and Local Governments, the states collected $181.9 billion in personal income taxes in 2003.

Property Taxes

A property tax is tax levied on the value of land, buildings, businesses, or personal property, including business equipment and automobiles. According to the

TABLE 8.6

City revenues, by source, for largest cities, 2001
[In millions of dollars (58,523 represents $558,523,000,000). Cities ranked by enumerated population as of April 1. Data reflect inclusion of fiscal actitvity of dependent school systems where applicable.]
		General revenue
			Intergovernmental				General revenue from own sources
				From federal government	From state/local government	From local government		Taxes					Current charges			Miscellaneous			Employee retire ment revenue
										Sales and gross receipts				Parks and recreation			Interest earnings
Cities ranked by 2000 population	Total revenue	Total	Total				Total	Total	Property	Total	Geneal sales	Public utilities	Total		Sewerage1	Total		Utility revenue2
—Represents or rounds to zero.
1Includes solid waste management.
2Includes water, electric, and transit.
3Represents, in effect, city-county consolidated government.
SOURCE: "No. 449. City Governments—Revenue for Largest Cities: 2001," in "Section 8: State and Local Government Finances and Employmen t," Statistical Abstract of the United States, 2004, http://www.census.gov/prod/2004pubs/04statab/stlocgov.pdf (accessed March 10, 2005)
New York, NY	58,523	51,262	19,841	2,806	16,947	88	31,421	23,579	8,276	4,832	3,679	431	5,103	55	971	2,740	887	2,869	4,392
Los Angeles, CA	11,287	6,056	1,035	297	596	142	5,021	2,519	753	1,210	483	610	1,688	83	492	814	483	3,630	1,602
Chicago, IL	6,389	4,884	1,337	464	873	—	3,547	2,033	664	1,146	196	483	888	—	137	627	320	310	1,196
Houston, TX	2,569	2,164	163	121	38	—	2,001	1,153	567	552	330	176	592	26	284	255	158	281	124
Philadelphia, PA3	5,405	4,673	1,933	510	1,295	128	2,740	2,044	364	196	111	—	537	14	196	159	96	658	74
Phoenix, AZ	2,312	2,044	704	264	385	56	1,340	732	174	511	368	92	447	26	157	160	117	220	48
San Diego, CA	2,574	2,080	351	109	167	75	1,729	959	228	646	413	44	324	48	183	445	146	240	254
Dallas, TX	2,308	1,687	114	63	50	—	1,574	728	375	336	217	82	639	36	206	206	145	200	421
San Antonio, TX	2,463	984	148	41	100	—	836	409	195	199	134	22	255	27	154	171	126	1,426	53
Detroit, MI	3,409	3,758	2,299	363	1,905	31	1,459	893	401	139	—	53	286	13	204	280	71	191	−540
San Jose, CA	1,493	1,484	245	89	9	58	1,239	684	222	293	169	97	340	20	155	215	107	18	−9
Honolulu, HI3	1,109	977	177	115	61	800	505	380	69	—	23	21	17	18	77	52	132	—
Indianapolis, IN3	1,895	1,518	429	64	352	13	1,089	625	484	41	—	—	358	22	67	106	62	347	30
San Francisco, CA3	6,095	4,893	1,740	378	1,356	—	3,153	1,747	626	674	387	89	1,053	37	152	352	255	337	865
Jacksonville, FL3	2,230	1,217	254	130	123	—	964	510	283	214	124	81	235	—	124	219	185	887	125
Columbus, OH	1,100	958	140	45	85	10	818	500	34	15	—	—	234	—	138	84	46	142	—
Austin, TX	1,864	885	58	41	17	—	826	373	180	165	112	24	314	21	146	140	97	913	67
Baltimore, MD3	2,571	2,369	1,330	83	1,177	70	1,039	785	491	62	—	26	136	11	70	118	52	76	126
Memphis, TN	2,941	1,532	995	20	496	479	537	331	275	44	—	16	133	46	62	73	45	1,180	229
Milwaukee, WI	1,042	752	389	70	305	15	363	184	174	—	—	—	106	—	47	73	38	62	228
Boston, MA	2,763	2,499	1,183	109	1,071	—	1,316	997	925	30	—	—	186	—	104	133	44	94	170
Washington, DC	5,936	5,679	1,643	1,589	—	54	4,036	3,337	707	999	617	200	299	24	111	400	111	67	190
Nashville, TN3	2,409	1,520	310	—	300	—	1,210	812	475	271	237	—	234	—	94	164	119	800	89
El Paso, TX	550	441	65	46	11	—	375	206	107	93	68	22	109	—	59	60	28	62	47
Seattle, WA	1,981	1,300	117	31	79	—	1,182	656	225	272	136	99	298	46	218	228	50	613	68
Denver, CO3	2,137	1,852	179	13	166	—	1,673	733	154	486	440	16	645	25	63	296	129	153	131
Charlotte, NC	1,024	982	254	62	71	122	728	296	218	30	—	—	239	27	109	193	63	52	−10
Ft Worth, TX	842	541	33	—	33	—	508	320	157	125	122	—	100	—	78	89	53	129	172
Portland, OR	811	738	115	30	49	35	624	310	186	52	—	39	220	27	143	93	40	71	—
Oklahoma City, OK	860	694	75	45	29	—	620	327	38	281	252	27	182	10	70	111	57	61	105
Tucson, AZ	702	577	225	68	148	9	352	239	41	184	158	18	74	16	10	39	22	102	22
New Orleans, LA	974	886	191	60	131	—	694	392	155	210	140	48	193	—	70	109	50	55	33
Las Vegas, NV	544	543	208	—	172	31	335	143	70	39	—	34	123	—	57	69	27	—	—
Cleveland, OH	1,240	911	193	46	147	—	718	421	66	32	—	—	165	—	20	132	67	329	—
Long Beach, CA	971	832	145	57	76	13	686	215	67	108	37	57	397	—	73	75	31	138	—

U.S. Department of Treasury, property taxes in the United States date back to the Massachusetts Bay Colony in 1646, and the separate states began imposing property taxes soon after declaring independence from Britain. In the early twenty-first century, property taxes are the primary means of generating income for local governments in the United States, including cities, school districts, and counties. According to the U.S. Census Bureau in Federal, State, and Local Governments, the states collected $104.7 billion in property taxes in 2003.

Local governments determine the tax rate and the percent of the property's value against which taxes are assessed. For example, in New York City, taxes on residential properties of one, two, or three units were calculated at a rate of 15.094% on 6% of a property's assessed value in 2005. In Tax Rates and Tax Burdens Gandhi compared residential property taxes in the largest city in each state in 2003 and found that Providence, Rhode Island, had the highest property taxes at $3.88 per $100 of a property's assessed value.

Sales Taxes

As of 2004 state sales taxes were charged in all states except Alaska. In some areas, local governments also levied sales taxes. In 2004, according to the FTA, state sales taxes ranged from 2.9% in Colorado to 7% in Mississippi, Rhode Island, and Tennessee. States often limit the percentage a local government can charge in sales taxes. Nevertheless, the combined state and local sales taxes in 2004 ranged up to 11% in Alabama, 10.625% in Arkansas, 10.5% in Oklahoma, and 10.25% in Louisiana. In Alaska, where there was no state sales tax in 2004, local governments were authorized to levy up to 7%. According to the U.S. Census Bureau, in Federal, State, and Local Governments: 2003 State Government Tax Collections, the states collected $273.8 billion in taxes on sales and gross receipts, which equaled $943.43 per person.