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1 Jared Walczak, Unpacking the State and Local Tax Toolkit: Sources of State and Local Tax Collections 1 (2017)

handle is hein.taxfoundation/upsloxk0001 and id is 1 raw text is: Unpacking the State and Local Tax Toolkit: Sources of State and Local Tax Collections FISCAL FACT No. 550 June 2017 Jared Walczak Senior Policy Analyst The Tax Foundation is the nation's leading independent tax policy research organization. Since 1937, our research, analysis, and experts have informed smarter tax policy at the federal, state, and local levels. We are a 501(c)(3) non-profit organization. @2017 Tax Foundation Distributed under Creative Commons CC-BY NC 4.0 Editor, Rachel Shuster Designer, Dan Carvajal Tax Foundation 1325 G Street, NW, Suite 950 Washington, DC 20005 202.464.6200 taxfoundation.org * Property taxes remain the primary source of tax collections at the local level, responsible for 72.5 percent of local tax revenue in fiscal year 2014. Once a significant driver of state budgets as well, their share of state collections has dropped to a mere 1.6 percent. * While they feature prominently in public debate, corporate income taxes only generated 3.7 percent of state and local tax revenue in fiscal year 2014. They are also among the more volatile sources of revenue for states. * Individual income taxes are the second largest source of state tax revenue, though nine states forego the taxation of wage income (of these, two tax interest and dividend income). Income taxes are less pro-growth than consumption taxes because they discourage savings and labor force participation. * Sales taxes generated 31.4 percent of state tax revenue in fiscal year 2014, and are a significant source of revenue for all 45 states which impose them. They also constitute a major local government revenue stream in some states, with local governments in three states deriving more than 40 percent of their tax revenue from sales taxes. * Significant regional variations exist in tax reliance, with New England states relying the most heavily on property taxes, while Southeastern and Southwestern states lean on sales taxes for a large share of their state and local tax revenue. Severance taxes have an outsized influence in the more resource-rich Far West. * The mix of tax sources states choose can have important implications for both revenue stability and economic growth, and the many variations across states are indicative of the different ways that states weigh competing policy goals.

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