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 $3.0 trillion of general revenues in year 2016.
State and Local Revenues
State general sales tax rates in 2019 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 and Gross Receipts 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.
Individual Income Taxes
In 2019, 28 states and the District of Columbia offered their own EITC.
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 2019, per gallon gas tax rates ranged from 8.95 cents in Alaska to 57.6 cents in Pennsylvania.
Motor Fuel Taxes
All states tax cigarettes, but rates vary significantly. Cigarette taxes are typically paid per pack. In 2019, Missouri imposes the lowest state cigarette tax rate ($0.17) and the District of Columbia and New York have the highest ($4.35).
Cigarette Taxes
Severance tax revenue was less than 1 percent of state and local general revenue in 2016, but it is often a major source of revenue in Alaska, North Dakota, and Wyoming.
Severance Taxes
In 2019, 12 states and the District of Columbia levied an estate tax, and six levied an inheritance tax. Maryland 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.
State and Local Government Pensions
While no state currently taxes sweetened beverages, several localities levy what’s commonly referred to as a soda tax. All six localities with a soda tax in 2019 levied a per volume excise tax on drinks sweetened with sugar and one government levied a per volume tax on all sweetened drinks. However, a state or locality could instead tax the amount of sugar in a drink—similar to how states and localities tax alcohol.
Soda Taxes
Alcohol taxes are selective sales taxes typically levied as an amount per unit sold (i.e., per gallon of beer) and collected from the producer or seller of the product. However, the taxes are included in the final purchase price and thus passed on to consumers.
Alcohol Taxes
Marijuana taxes are selective sales taxes on the legal purchase of marijuana. Most states tax the consumer purchase of marijuana (similar to a retail sales tax) but some tax the transaction between cultivators and distributors or retailers (similar to taxes on alcohol).