(The Center Square) – New York has the highest tax burden in the country, according to a new analysis.
The Empire State’s property tax burden and individual income taxes ranks first and total sales and excise tax at 22nd according to personal finance website WalletHub’s 2021’s Tax Burden by State report.
WalletHub compared the states in property taxes, sales and excise taxes and individual income taxes as a share of a total personal income in the state.
WebHub financial writer Adam McCann said in the report a tax burden measures the proportion of personal income that residents pay toward state and local taxes, unlike tax rates, which vary based on an individual’s circumstances. Tax burdens aren’t uniform across the United States.
“Since the tax code is so complicated and has rules based on individual household characteristics, it’s hard for the average person to tell how they will be impacted,” McCann said.
The relationship between state tax burden and economic growth depends on the type of tax and other economic conditions, according to Annette Nellen CPA, Esq. and professor at San Jose State University.
“For example, if the state has tax and other incentives or favorable rules for a particular type of industry such as high tech, economic growth might be greater because more tech firms may locate or expand in the state,” she said in the report.
Philip Cary Christian, Ph.D. and associate professor at Georgia Southern University, said in the report that income taxes have the potential to be the most fair because they can be made to be progressive rates – higher rates with higher levels of income – which can then be used to offset the regressive – such as sales and local taxes – nature of other taxes.
When asked by WalletHub what the most effective ways for state and local governments to recover losses in tax revenues caused by the pandemic, he suggested using a mix of taxes and fees rather than being overly reliant on a single tax.
“Both state and local governments hope for increased assistance from the federal government in the form of intergovernmental revenue,” he said.
But that didn’t happen during the Great Recession of 2008, he said, adding that most local governments he had reviewed tended to raise property taxes and “other taxes” but did not touch income taxes.
The increased water, sewer and electric rates (where available) tended to have a regressive impact on residents.
“I anticipate that we will see similar actions on the part of state and local governments in response to the pandemic,” he said.
The report indicated that Republican-leaning states have a lower tax burden than Democrat-leaning states, with Blue states overall getting a 19.32% rate compared to Red states at 31.36%.