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Virginia Ranks 30th on Latest State-Local Tax Burden List

Liz Malm and Gerald Prante have prepared the latest, FY 2011 annual state-local tax burden rankings for the Tax Foundation. Their five key findings:

  • "During the 2011 fiscal year, state-local tax burdens as a share of state incomes decreased on average. This trend was largely driven by the growth of income in all states.
  • "In 2011, the residents of New York, New Jersey, and Connecticut had the highest state-local tax burdens as a share of income in the nation. In these states, residents have forgone over 11.9 percent of income due to state and local taxes.
  • "Residents of Wyoming paid the lowest percentage of income in 2011 at just 6.9 percent. They replaced Alaska, which had previously been the least-taxed for multiple decades, as the lowest-burdened state in the nation. After Wyoming and Alaska, the next lowest-taxed states were South Dakota, Texas, and Louisiana.
  • "State-local tax burdens are very close to one another and slight changes in taxes or income can translate to seemingly dramatic shifts in rank. For example, the twenty mid-ranked states, ranging from Oregon (16th) to Georgia (35th), only differ in burden by just over one percentage point.
  • "On average, taxpayers pay more to their own state and local governments (73 percent of total burden). Taxes paid within states of residence decreased on average in 2011, while taxes paid to other states increased, leading to a slight decrease in total burden. Some states deviated from these national trends, however."

Per Table 1, the U.S. average state-local tax burden is 9.6% (as a share of state income). Two states have rates in the 12% range (New York and New Jersey). Three states are in the 11% range (Connecticut, California, and Wisconsin). Eleven states are in the 10% range. The two lowest tax burden states are Alaska (7.0% and Wyoming (6.9%). The District's tax burden is just above the national average -- at 9.7%. Virginia ranks #30 with a burden of 9.2%. It is closely bunched there, which means its ranking could change measurably if the General Assembly goes the least bit wild on taxes. (emphasis added)

An interesting point made by Malm and Prante is:

"An interesting observation is that many of the least-burdened states do without a major tax. For example, Alaska (49th), Nevada (43rd), South Dakota (48th), Texas (47th), and Wyoming (50th) all do without a tax on wage income. Similarly, Nevada, South Dakota, and Wyoming all lack a corporate income tax, and Alaska has no state-level sales tax (though it does allow local governments to levy sales taxes).[7] While this is an interesting correlation, it does not answer the question of whether levying fewer types of taxes leads to lower tax burdens or whether a political demand for lower taxes leads to fewer types of taxes being levied. Also worth considering is the possibility that opting to not levy a personal income tax causes a state to rely more on other forms of taxation that might be more exportable."

Meanwhile at Virginia's leading policy blog, Bacon's Rebellion, yesterday, Jim Bacon commented on Virginia's ranking, saying:

"Hopefully, we can dispense with the nonsense that Virginia is a “low tax” state that starves its public sector. We’re not out of control like the aforementioned big tax-and-spenders but we’re well within the middle of the pack, with very small percentages differentiating us from those immediately above and below."

Once again, we thank the Tax Foundation for shining the light of transparency on the taxes we pay.

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