State and Local Backgrounders
Backgrounders provide brief explanations that can help policymakers, media, and citizens navigate important state and local issues.
State and local governments spent $2.9 trillion on direct general government in fiscal year 2016.
State and Local Expenditures
State and local governments collected a combined $2.9 trillion of general revenues in year 2015.
State and Local Revenues
State general sales tax rates in 2017 range from 2.9 percent in Colorado to 7.25 percent in California. Alaska, Delaware, Montana, New Hampshire, and Oregon did not have a general state sales tax.
General Sales Taxes
Taxpayers in all 50 states and the District of Columbia pay property taxes, but the tax is primarily levied by cities, counties, and school districts rather than states.
Property Taxes
The top state individual income tax rates ranged from 2.9 percent in North Dakota to 13.3 percent in California (including the state’s 1 percent surcharge on taxable income over $1 million) in 2017. Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming did not tax individual income of any kind.
Individual Income Taxes
In 2017, 25 states and the District of Columbia offered their own EITC. Washington also has a credit, but it has never been implemented or funded. Hawaii and South Carolina will offer an EITC in 2018, and Montana will add one in 2020. North Carolina eliminated its EITC in 2014.
State Earned Income Tax Credits
State and local governments collected a combined $57 billion in revenue from corporate income taxes, or only 2 percent of general revenue.
Corporate Income Taxes
As a group, charges account for nearly as much revenue as sales taxes and property taxes and more revenue than individual income taxes and corporate income taxes combined.
Charges
All states tax motor fuels. In 2017, per gallon gas tax rates ranged from 8.95 cents in Alaska to 58.2 cents in Pennsylvania.
Motor Fuel Taxes
All states tax cigarettes, but rates vary significantly. Cigarette taxes are typically paid per pack. In 2017, Missouri imposes the lowest state cigarette tax rate ($0.17) and New York has the highest ($4.35).
Cigarette and Alcohol Taxes
Severance tax revenue was only 1 percent of state and local general revenue in 2014. But it is often a major source of revenue in Alaska, North Dakota, and Wyoming.
Severance Taxes
In 2017, 14 states and the District of Columbia levied an estate tax, and Iowa, Kentucky, Nebraska, and Pennsylvania levied an inheritance tax. Maryland and New Jersey levied both.
Estate and Inheritance Taxes
Pensions that are already underfunded may face additional demographic pressures, as fewer active workers are available to provide contributions that help support benefit payments to current retirees.