State and Local Backgrounders
Backgrounders provide brief explanations that can help policymakers, media, and citizens navigate important state and local issues.
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.
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.
The top state individual income tax rates ranged from 2.9 percent in North Dakota to 13.3 percent in California.
State and local governments collected a combined $57 billion in revenue from corporate income taxes, or only 2 percent of general revenue.
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.
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.
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).
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.
In 2019, 12 states and the District of Columbia levied an estate tax, and six levied an inheritance tax. Maryland levied both.
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.
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.
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.
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).