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Taxation — Facts & Figures 2014: How Does Your State Compare?

April 16, 2014 Comments off

Facts & Figures 2014: How Does Your State Compare?
Source: Tax Foundation

This morning, the Tax Foundation released the 2014 edition of Facts & Figures: How Does Your State Compare? Just in time for tax season, the latest edition of this popular pocket-sized handbook contains the rates and rankings of all 50 states on 39 different measures of tax and fiscal policy.

Topics include information on tax measures (such as revenue per capita, federal aid to states, and State Business Tax Climate Index rankings), individual income taxes, corporate income taxes, general sales taxes, excise taxes, property taxes, state debt, and population data. For a full list of all measures included in this year’s edition, click here.

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Tax Freedom Day® Arrives on April 21, 2014

April 10, 2014 Comments off

Tax Freedom Day® Arrives on April 21, 2014
Source: Tax Foundation

Tax Freedom Day, the day on which American’s have collectively earned enough income to pay off the total federal, state, and local tax bill, will arrive 111 days into the year on April 21, according to the annual report released this morning by the nonpartisan Tax Foundation.

While the national date arrives 6 days after the deadline for filing taxes, each state’s total federal, state, and local tax burden varies greatly. Louisiana’s Tax Freedom Day is the earliest and arrives on March 30, and is followed by Mississippi (Apr 2) and South Dakota (Apr 4). New Jersey and Connecticut are tied with the latest date on May 9 and they are preceded by New York (May 4).

The study’s key findings include:

  • Tax Freedom Day is three days later than last year due mainly to the continuing economic recovery, which will boost federal tax revenue collected through the corporate, payroll, and individual income tax.
  • Americans will spend more on taxes in 2014 than they will on food, clothing, and housing combined.
  • Americans will spend 42 days working to pay off income taxes, 15 days for excise taxes, and 11 days for property taxes. Click here for a full breakdown.
  • Americans will pay $3 trillion in federal taxes and $1.5 trillion in state and local taxes, for a total bill of more than $4.5 trillion, or 30.2 percent of the nation’s income.
  • If you include annual federal borrowing, which represents future taxes owed, Tax Freedom Day would occur on May 6, 15 days later.

See also: Tax Foundation Figures Do Not Represent Typical Households’ Tax Burdens (Center on Budget and Policy Priorities)

The High Burden of State and Federal Capital Gains Tax Rates

February 28, 2014 Comments off

The High Burden of State and Federal Capital Gains Tax Rates
Source: Tax Foundation

Savings in an economy is important. It leads to higher levels of investment, a larger capital stock, increased worker productivity and wages, and faster economic growth. However, the United States currently places a heavy tax bias against saving and investment. One way it does this is through a high top marginal tax rate on capital gains.

Currently, the United States’ top marginal tax rate on long-term capital gains income is 23.8 percent. In addition, taxpayers face state-level capital gains tax rates as low as zero and as high as 13.3 percent. As a result, the average combined top marginal rate in the United States is 28.7 percent. This rate exceeds the average top capital gains tax rate of 18.2 percent faced by taxpayers throughout the industrialized world. Even more, taxpayers in some U.S. states face top rates on capital gains over 30 percent, which is higher than most industrialized countries. In fact, California’s top marginal capital gains tax rate of 33 percent is the third highest in the industrialized world.

2014 State Business Tax Climate Index

October 31, 2013 Comments off

2014 State Business Tax Climate Index
Source: Tax Foundation

The Tax Foundation’s 2014 edition of the State Business Tax Climate Index enables business leaders, government policymakers, and taxpayers to gauge how their states’ tax systems compare.

The 10 best states in this year’s Index are:

  1. Wyoming
  2. South Dakota
  3. Nevada
  4. Alaska
  5. Florida
  6. Washington
  7. Montana
  8. New Hampshire
  9. Utah
  10. Indiana

The absence of a major tax is a dominant factor in vaulting many of these ten states to the top of the rankings. Property taxes and unemployment insurance taxes are levied in every state, but there are several states that do without one or more of the major taxes: the corporate tax, the individual income tax, or the sales tax. Wyoming, Nevada, and South Dakota have no corporate or individual income tax; Alaska has no individual income or state-level sales tax; Florida has no individual income tax; and New Hampshire and Montana have no sales tax.

But this does not mean that a state cannot rank in the top ten while still levying all the major taxes. Indiana, which ousted Texas from the top ten this year (see p. 5), and Utah have all the major tax types, but levy them with low rates on broad bases.

Putting a Face on America’s Tax Returns: A Chart Book (Second Edition)

October 30, 2013 Comments off

Putting a Face on America’s Tax Returns: A Chart Book
Source: Tax Foundation

Our new book dispels common misconceptions about the US tax code, and illustrates who pays what to Uncle Sam.

Categories: Tax Foundation, taxation

2014 State Business Tax Climate Index

October 15, 2013 Comments off

2014 State Business Tax Climate Index
Source: Tax Foundation

The Tax Foundation’s 2014 edition of the State Business Tax Climate Index enables business leaders, government policymakers, and taxpayers to gauge how their states’ tax systems compare.

The 10 best states in this year’s Index are:

  1. Wyoming
  2. South Dakota
  3. Nevada
  4. Alaska
  5. Florida
  6. Washington
  7. Montana
  8. New Hampshire
  9. Utah
  10. Indiana

The absence of a major tax is a dominant factor in vaulting many of these ten states to the top of the rankings. Property taxes and unemployment insurance taxes are levied in every state, but there are several states that do without one or more of the major taxes: the corporate tax, the individual income tax, or the sales tax. Wyoming, Nevada, and South Dakota have no corporate or individual income tax; Alaska has no individual income or state-level sales tax; Florida has no individual income tax; and New Hampshire and Montana have no sales tax.

Sales Tax Holidays: Politically Expedient but Poor Tax Policy

July 24, 2013 Comments off

Sales Tax Holidays: Politically Expedient but Poor Tax Policy
Source: Tax Foundation

Key Findings

  • 17 states, primarily in the southeastern U.S., will hold a sales tax holiday in 2013, down from a peak of 19 states in 2010.
  • Sales tax holidays do not promote economic growth or significantly increase consumer purchases; the evidence shows that they simply shift the timing of purchases. Some retailers raise prices during the holiday, reducing consumer savings.
  • Sales tax holidays create complexities for tax code compliance, efficient labor allocation, and inventory management. However, free advertising for what is effectively a paltry 4 to 7 percent sale leads many larger businesses to lobby for the holidays.
  • Most sales tax holidays involve politicians picking products and industries to favor with exemptions, arbitrarily discriminating between products and across time, and distorting consumer decisions.
  • While sales taxes are somewhat regressive, this is often exaggerated to sell the idea that sales tax holidays are an effective way of providing relief to the poor. To give a small amount of tax savings to low-income individuals, holidays give a large amount to others.
  • Political gimmicks like sales tax holidays distract policymakers and taxpayers from genuine, permanent tax relief. If a state must offer a “holiday” from its tax system, it is a sign that the state’s tax system is uncompetitive. If policymakers want to save money for consumers, then they should cut the sales tax rate year-round.

State and Local Sales Tax Rates in 2013

May 13, 2013 Comments off

State and Local Sales Tax Rates in 2013

Source: Tax Foundation

Retail sales taxes are one of the more transparent ways to collect tax revenue. While graduated income tax rates and brackets are complex and confusing to many taxpayers, the sales tax is easier to understand: people can reach into their pocket and see the rate printed on a receipt.

Less known, however, are the local sales taxes collected in 37 states. These rates can be substantial, so a state with a moderate statewide sales tax rate could actually have a very high combined state-local rate compared to other states. This report provides a population-weighted average of local sales taxes in each state in an attempt to give a sense of the statutory local rate for each state. See Table 1 at the end of this Fiscal Fact for the full state-by-state listing of state and local sales tax rates.

Tax Freedom Day(R) 2013 is April 18, Five Days Later Than Last Year

April 4, 2013 Comments off

Tax Freedom Day® 2013 is April 18, Five Days Later Than Last Year

Source: Tax Foundation

What is Tax Freedom Day?

Tax Freedom Day is the day when the nation as a whole has earned enough money to pay its total tax bill for the year. A vivid, calendar based illustration of the cost of government, Tax Freedom Day divides all federal, state, and local taxes by the nation’s income. In 2013, Americans will pay $2.76 trillion in federal taxes and $1.45 trillion in state taxes, for a total tax bill of $4.22 trillion, or 29.4 percent of income. April 18 is 29.4 percent, or 108 days, into the year.

Why is Tax Freedom Day later this year?

Tax Freedom Day is five days later than last year, due mainly to the fiscal cliff deal that raised federal taxes on individual income and payroll. Additionally, the Affordable Care Act’s investment tax and excise tax went into effect. Finally, despite these tax increases, the economy is expected to continue its slow recovery, boosting profits, incomes, and tax revenues.

Categories: Tax Foundation, taxation

Super Bowl Tax Bill

February 5, 2013 Comments off

Super Bowl Tax Bill

Source: Tax Foundation

As the Baltimore Ravens bask in their glory after their Sunday night Super Bowl XLVII victory against the San Francisco 49ers, they must now prepare to be hit by the the federal income tax. All 53 players on the roster make at least $390,000, so after subtracting a personal exemption (which is actually phased out at $250,000) and a standard deduction, they would all face the top federal income tax rate of 39.6% on their $150,000 in post season earnings for their victories in the Division Playoff, the Conference Championship Game, and the Super Bowl.

Although these players have the ability to pay their taxes when receiving an NFL salary and are amongst the top percent of earners in the United States, the amount of federal income taxes owed on their salaries and post season shares is shocking when only a personal exemption and a standard deduction is subtracted. Haloti Nagata as the highest earner with a 2012 salary of $10.4 million would pay around $4.1 million if this income and his post season income both accrued in 2013. This is probably an overstatement of actual income tax paid because most players would take advantage of itemized deductions (which are now limited) and credits to lower their tax liability to some degree. But even if he had $1 million in itemized deductions, he would still end up paying $3.8 million in federal income tax, plus another $250,000 in federal payroll tax, and that does not include the employer portion of payroll taxes. His effective federal tax rate would be 39 percent.

2013 State Business Tax Climate Index

November 1, 2012 Comments off

2013 State Business Tax Climate Index

Source: Tax Foundation

The Tax Foundation’s 2013 edition of the State Business Tax Climate Index enables business leaders, government policymakers, and taxpayers to gauge how their states’ tax systems compare.

The 10 best states in this year’s Index are:

Wyoming

South Dakota

Nevada

Alaska

Florida

Washington

New Hampshire

Montana

Texas

Utah

The absence of a major tax is a dominant factor in vaulting many of these ten states to the top of the rankings. Property taxes and unemployment insurance taxes are levied in every state, but there are several states that do without one or more of the major taxes: the corporate tax, the individual income tax, or the sales tax. Wyoming, Nevada, and South Dakota have no corporate or individual income tax; Alaska has no individual income or state-level sales tax; Florida has no individual income tax; and New Hampshire and Montana have no sales tax.

The lesson is simple: a state that raises sufficient revenue without one of the major taxes will, all things being equal, have an advantage over those states that levy every tax in the state tax collector’s arsenal.

The 10 lowest ranked, or worst, states in this year’s Index are:

Maryland

Iowa

Wisconsin

North Carolina

Minnesota

Rhode Island

Vermont

California

New Jersey

New York

Despite moderate corporate taxes, New York scores at the bottom this year by having the worst individual income tax, the sixth-worst unemployment insurance taxes, and the sixth-worst property taxes. The states in the bottom 10 suffer from the same afflictions: complex, non-neutral taxes with comparatively high rates.

New York, New Jersey Lead Nation in Property Tax Burden

May 27, 2011 Comments off

New York, New Jersey Lead Nation in Property Tax Burden
Source: Tax Foundation

For some time now, the Tax Foundation has published median property tax statistics for counties in the United States. These statistics are based on data from the American Community Survey. Previously, data limitations meant that only mid- to high-population counties could be included in the rankings. Now, for the first time, we are pleased to present data that includes nearly all counties in the United States. We rank counties three different ways: by median property taxes paid on homes, by median property taxes as a percentage of median home values, and by median property taxes as a percentage of median household income.

The Census Bureau recently released American Community Survey data as a five-year average, from 2005 to 2009. The larger number of survey responses and correspondingly larger sample sizes included in this five-year period allows estimates to be calculated for every county (or county-level entity) in the United States. Previously, these data releases were limited to one-year or three-year averages, and the lower sample sizes for these releases meant that only mid- to high-population counties were included.

Our data release includes nearly all 3,139 counties in the United States. We excluded 217 counties from our rankings because of their unreliably small sample size, for a final universe of 2,922 counties.

Hunterdon County, New Jersey ranks first for median property taxes. For median property taxes as a percentage of median home value, Orleans County, New York takes the top spot, and all of the top ten counties for this statistic are in upstate New York. Finally, the No. 1 county for median property taxes as a percentage of median household income is Passaic County, New Jersey.

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