Thursday, March 28, 2024
Hawai'i Free Press

Current Articles | Archives

Wednesday, May 13, 2020
To What Extent Does Your State Rely on Individual Income Taxes?
By Tax Foundation @ 8:56 PM :: 2843 Views :: Hawaii Statistics, Taxes

To What Extent Does Your State Rely on Individual Income Taxes?

by Janelle Cammenga, Tax Foundation, May 13, 2020

Sources of state revenue have come under closer scrutiny in light of the impact of the coronavirus outbreak, as different tax types have differing volatility and economic impact—although even beyond these unique circumstances, it is important for policymakers to understand the trade-offs associated with different sources of tax revenue. This week’s map looks at what percentage of each state’s state and local tax collections is attributable to the individual income tax.

State and localities rely heavily on the individual income tax, which comprised 23.3 percent of total U.S. state and local tax collections in fiscal year 2017, the latest year of data available. The individual income tax ranks just below the general sales tax (23.6 percent), both behind property taxes (31.9 percent) as the largest category of state and local revenue sources (See Facts & Figures Table 8).

2020 state individual income tax reliance 2020 state income tax reliance

Of all the states, Oregon and Maryland rely most heavily on individual income taxes, which account for 42.7 percent and 37.9 percent of their total state and local tax collections respectively. Both are among the 17 states where localities also levy income taxes. Oregon has chosen not to collect sales taxes, a decision which contributes to that state’s heavy reliance on the individual income tax.

While the individual income tax tends to be a major revenue source for state and local governments, some states rely on it very little, and some not at all. Seven states (Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming) do not collect individual income taxes, while two states (New Hampshire and Tennessee) collect taxes on dividend and interest income but not wage income. Tennessee’s tax on investment income—known as the “Hall tax”—is in the process of being phased out and will be fully repealed next year, which will leave the state with no individual income tax.

It comes as no surprise that New Hampshire and Tennessee raise the least amount of revenue from the individual income tax, 1.0 and 1.1 percent respectively. In North Dakota and Arizona, the next lowest states, the individual income tax generates 6.3 percent and 14.1 percent of their total tax collections respectively.

While the current outbreak differs from other economic crises in that social distancing restrictions and the nature of pandemics have caused consumption to drop dramatically, it is generally true that income taxes are more volatile than consumption taxes in an economic downturn, as income itself tends to fluctuate more than consumption. In addition, states’ mirroring of the federal government by delaying income tax deadlines means that income tax collections will temporarily be much lower than in years past.

Volatility is not the only factor to consider. As we’ve pointed out in the past, a state’s combination of tax sources has implications for its revenue stability and economic growth. Income taxes tend to be more harmful to economic growth than consumption taxes and property taxes. Income taxes fall on labor and savings, while consumption taxes, like the sales tax, fall on what people spend instead of what they earn. As a result, income taxes tend to be less neutral than sales taxes.

Links

TEXT "follow HawaiiFreePress" to 40404

Register to Vote

2aHawaii

808 Silent Majority

Aloha Pregnancy Care Center

AntiPlanner

Antonio Gramsci Reading List

A Place for Women in Waipio

Ballotpedia Hawaii

Broken Trust

Build More Hawaiian Homes Working Group

Christian Homeschoolers of Hawaii

Cliff Slater's Second Opinion

DVids Hawaii

FIRE

Fix Oahu!

Frontline: The Fixers

Genetic Literacy Project

Grassroot Institute

Habele.org

Hawaii Aquarium Fish Report

Hawaii Aviation Preservation Society

Hawaii Catholic TV

Hawaii Christian Coalition

Hawaii Cigar Association

Hawaii ConCon Info

Hawaii Debt Clock

Hawaii Defense Foundation

Hawaii Family Forum

Hawaii Farmers and Ranchers United

Hawaii Farmer's Daughter

Hawaii Federalist Society

Hawaii Federation of Republican Women

Hawaii History Blog

Hawaii Homeschool Association

Hawaii Jihadi Trial

Hawaii Legal News

Hawaii Legal Short-Term Rental Alliance

Hawaii Matters

Hawaii's Partnership for Appropriate & Compassionate Care

Hawaii Public Charter School Network

Hawaii Rifle Association

Hawaii Shippers Council

Hawaii Smokers Alliance

Hawaii State Data Lab

Hawaii Together

HIEC.Coop

HiFiCo

Hiram Fong Papers

Homeschool Legal Defense Hawaii

Honolulu Moms for Liberty

Honolulu Navy League

Honolulu Traffic

House Minority Blog

Imua TMT

Inouye-Kwock, NYT 1992

Inside the Nature Conservancy

Inverse Condemnation

Investigative Project on Terrorism

July 4 in Hawaii

Kakaako Cares

Keep Hawaii's Heroes

Land and Power in Hawaii

Legislative Committee Analysis Tool

Lessons in Firearm Education

Lingle Years

Managed Care Matters -- Hawaii

Malama Pregnancy Center of Maui

MentalIllnessPolicy.org

Military Home Educators' Network Oahu

Missile Defense Advocacy

MIS Veterans Hawaii

NAMI Hawaii

Natatorium.org

National Christian Foundation Hawaii

National Parents Org Hawaii

NFIB Hawaii News

No GMO Means No Aloha

Not Dead Yet, Hawaii

NRA-ILA Hawaii

Oahu Alternative Transport

Obookiah

OHA Lies

Opt Out Today

OurFutureHawaii.com

Patients Rights Council Hawaii

PEACE Hawaii

People vs Machine

Practical Policy Institute of Hawaii

Pritchett Cartoons

Pro-GMO Hawaii

P.U.E.O.

RailRipoff.com

Rental by Owner Awareness Assn

ReRoute the Rail

Research Institute for Hawaii USA

Rick Hamada Show

RJ Rummel

Robotics Organizing Committee

School Choice in Hawaii

SenatorFong.com

Sink the Jones Act

Statehood for Guam

Talking Tax

Tax Foundation of Hawaii

The Real Hanabusa

Time Out Honolulu

Trustee Akina KWO Columns

UCC Truths

US Tax Foundation Hawaii Info

VAREP Honolulu

Waagey.org

West Maui Taxpayers Association

What Natalie Thinks

Whole Life Hawaii

Yes2TMT