States Take Seven Percent of Americans Paychecks

On average, a U.S. citizen turned over $1,921 in total taxes to state government last year. Nationally, state taxes totaled nearly 7 percent of Americans' personal income in 2000, according to Census data released Friday.

The biggest state tax burdens were in Hawaii, New Mexico, Vermont, Delaware, and Minnesota, when state taxes are figured in proportion to personal income. Hawaii ranked No. 1 because education, a governmental service covered by local government in other states, is a state service.

Because so many state services are often passed on to local governments, economists say a better measure of tax burdens nationwide is a snapshot of both state and local tax collections. But the most recent information on state and local taxes, released last week by the Census Bureau, is already three years old. That data ranked Maine, New York, New Mexico and Wisconsin as having the highest tax as a percentage of personal income in 1998.

Maine ranked first because the state changed some accounting practices in 1998, so some tax revenue was booked that year that otherwise would have been tallied in 1999 figures.

Both sets of data agree that Connecticut has the highest per capita tax. In 2000, Connecticut residents paid $2,987 per capita to the state, according to the Census Bureau.

Tax burdens can influence how much additional money middle-income workers must earn to purchase various goods and services, such as a new car or computer, compared to residents in other states. The true cost of goods and services in high-tax states such as New York is greater than in lower-tax states such as South Dakota.

Census data showed state government tax revenues grew from $500 billion in 1999 to $540 billion in 2000, an 8 percent increase. Individual income tax revenues collected by the states rose 13 percent over 1999, according to the 2000 Annual Survey of State Tax Collections.

Nationally, states collected about $296 million in licenses on alcoholic beverages, and $4.1 billion on alcohol sales taxes in 2000. The 50 states also brought in $15 billion on motor vehicle taxes. Corporation net income taxes paid to states produced $32 billion nationally.  

  • In 2000, no state showed a decrease in total tax revenue, according to the survey based on state government records. States with the largest percentage increases in total tax collections were:

    • New Hampshire (up 58 percent because of the enactment of several new tax laws)
    • Alaska (up 57 percent because of the effect of oil price increases that raised taxes on non-renewable natural resources)
    • Wyoming (up 19 percent) and,
    • California (up 16 percent)

    Census data on state tax collections showed that New Hampshire ranked lowest when state taxes are figured in proportion to personal income. But New Hampshire's low ranking is misleading because property taxes there are high, and more local taxes are collected than state taxes.

    New Mexico ranked second highest in taxes as a percentage of personal income, but in that state, most taxes are collected at the state level, not local level. For example, in 1998, New Mexico collected about 61 percent of taxes at the state level, and local tax collections represented 39 percent of tax revenues.

    Nick Johnson, senior policy analyst for the Center on Budget and Policy Priorities, said, "Every state has free rein to decide its state and local fiscal structure. You get a lot of diversity."

    The state-to-state variations make it difficult to compare state-only tax data, Johnson said. Determining which state has the highest tax burden requires factoring in local taxes, Johnson said.