Stateline Story

Vermont leads pack in taxes per person

  • April 05, 2006
  • By Daniel C. Vock

Vermont rocketed past five other states during last fiscal year to lead the country with the highest state tax burden per resident, according to a recent U.S. Census Bureau report.

Vermont's jump in rankings for the year ending last June 30 was the third biggest, after Alaska and North Dakota, but those states had plenty of company in adding revenue. In every state except New Hampshire, revenues per resident grew in fiscal year 2005.

In fact, collections increased by an average of 9.7 percent across the country, which translated into $57 billion more in state coffers. On average, states charged each of their residents $2,192, mostly from income and sales taxes.

The states that collected the most per person were Vermont, Hawaii, Wyoming, Connecticut and Delaware. South Dakota replaced Texas this year as the state with the lowest tax bills. But Texas still claimed the second-lowest burden, followed by New Hampshire, Colorado and Missouri. The Census report covered only taxes imposed by states, not local governments.

The Census data showcases the sunny financial situation states faced during the last fiscal year. It was a welcome break in the clouds for the states, which had endured the worst economic downturn since the Great Depression at the beginning of the decade.

Governors and lawmakers responded to the new revenue by shoring up the neglected budgets of highway departments and public universities, proposing new tax breaks and building up rainy day accounts to deal with future fiscal crises.

Many officials continue to push those politically popular tax breaks and programs in this election year when 36 governors seats are up for grabs and lawmakers are running for re-election in 46 states. But there are indications that the economic forecast is darkening.

For example, state tax revenues registered their weakest quarterly growth in two years during the last three months of 2005, according to an analysis released last month by the Nelson A. Rockefeller Institute of Government.

A state's tax burden is important because it helps determine whether businesses will move in or expand, whether families will move out to lower-tax states and whether states can offer their residents extensive social services or just a few.

In Vermont, where statewide property taxes for schools are such a volatile topic that one resort town threatened to secede over them, those escalating state property taxes are a big reason it topped the Census Bureau's list. Vermont moved to a new system for taxing real estate for the first time during the year the report covered.

The state collected $296 million more in property taxes last year than the previous year. That amounts to an increase of two-thirds. Meanwhile, Vermont also boosted its sales tax receipts last year while taking in less from both personal and corporate income taxes.

Alaska's rise is a different story. It now claims the eighth highest per-person tax receipts in the country (up from No. 22) largely because of oil royalties and corporate income taxes.

North Dakota was the other big gainer, moving up seven spots to No. 21.

The two states with the greatest drop-offs were Kansas and Mississippi, which both fell five places.

Hawaii, which has a statewide education system, topped the country in the amount of sales tax it collected from each resident. Hawaiians paid an average of $2,156 a piece in sales tax. The consumers with the next highest tab were in Washington state, where residents shelled out an average of $1,857 in sales tax.

Massachusetts, often lampooned as a high-tax state, had the seventh-highest overall ranking. But the Bay State imposed the highest income tax per resident, charging an average of $1,514 in payroll taxes.