The laboratories of democracy haven't settled on an ideal level of taxation. In some states, like New Jersey, residents fork over 12.2 percent of their income. In others, like Alaska, they pay as little as 6.3 percent. Some employ a statewide sales tax, while others tax property.
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The Tax Foundation report, "State-Local Tax Burdens Fall in 2009 as Tax Revenues Shrink Faster than Income," shows the extent of these differences. The single most important reason for the variation is that some states generate a significant amount of their tax revenue from businesses and out-of-state residents, thereby minimizing the burden of taxes borne by residents. Alaska, for example, gets 80 percent of tax receipts from oil companies.
Conversely, states with low out-of-state business receipts must collect a higher percent of taxes from their residents. This is case in New Jersey, which gets only 20 percent of its tax receipts from such sources. As a matter of fact, most of the really large companies in the region are on the other side of New Jersey's northeast border in New York State, thereby imposing a higher burden on residents.
Mark Robyn, economist at the Tax Foundation and author of the report, told 24/7 Wall St. that the "study accounts for the fact that all states are able to some extent to shift their tax burden onto the taxpayers of other states. Much of this 'tax exporting' happens naturally, through no special effort by policymakers, but some states have special sources of revenue that allow them to export more of their burden to non-residents. For example, Nevada relies on tourism taxes, while Alaska, Wyoming and North Dakota rely heavily on oil taxes that are passed on to consumers around the country."
The Tax Foundation's report divides state tax revenue into two categories: the amount contributed by residents, including income, property, and sales tax, and the amount contributed by non-residents, including taxes paid by out-of-state businesses and taxes collected by in-state business and paid by out-of-state residents. According to the Tax Foundation, because residents effectively pay more as consumers and receive less as employees as a result of corporate taxes, some business tax is also considered borne by the resident. Taxes paid by out-of-state business to the state include the tax Alaska collects from out-of-state oil companies to operate in the state. Taxes collected by in-state business from out-of-state residents include tax on things like sales tax and revenue from tourism.
In addition to the report from the Tax Foundation, 24/7 Wall St. reviewed data from the Census Bureau, the Federation of Tax Administrators, and the Mercatus Center at George Mason University.
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