While federal income taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. and most state income tax filings were due April 15th, it’s important to remember that these are just a portion of the taxes we pay. Throughout the year, state and local governments collect a variety of taxes to fund the services they provide. In addition to individual and corporate income taxes, state and local governments also collect sales, property, excise, and other taxes. The US Census Bureau releases total state and local tax collections figures, as well as tax collections figures broken down by tax type.
Today’s state tax map shows total state and local tax collections per capita in each of the 50 states and the District of Columbia as of fiscal year 2023, the most recent year of data available. Collections vary widely by state, making per capita collections figures—a measure of collections per person—especially useful, as they allow comparisons across differences in tax rates and bases, economic capacities, and policy decisions that impact the size and scope of government.
Across the country, state and local governments collected $7,038 per capita in total state and local taxes in FY 2023. The District of Columbia surpassed all 50 states with the highest tax collections per capita in the country ($15,009). After DC, the five states with the highest tax collections per capita were New York ($12,506), North Dakota ($9,834), Hawaii ($9,758), Connecticut ($9,388), and New Jersey ($9,178). In contrast, the five states with the lowest tax collections per capita were Mississippi ($4,868), Tennessee ($4,912), Alabama ($4,950), South Carolina ($4,984), and Arizona ($5,006).
The District of Columbia, New York, and New Jersey all have highly progressive state income tax structures and a greater reliance on public sector services like transit. Connecticut also has a progressive income tax structure, but to a lesser extent. Hawaii has a highly progressive income tax structure as well, but it also has an overly broad sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. , known as the General Excise TaxAn excise tax is a tax imposed on a specific good or activity. Excise taxes are commonly levied on cigarettes, alcoholic beverages, soda, gasoline, insurance premiums, amusement activities, and betting, and typically make up a relatively small and volatile portion of state and local and, to a lesser extent, federal tax collections., that applies to many business-to-business transactions. Hawaii also receives a large amount of tax revenue from tourism.
North Dakota is the exception. Of all the states with an individual income taxAn individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment. Though barely 100 years old, individual income taxes are the largest source, North Dakota has the lowest top marginal rate in the country at only 2.5 percent, but the state generates significant severance tax revenue from oil and gas production. The state’s natural resource-driven revenue structure generates substantial collections relative to its small population.
It’s worth noting that severance taxes are only one of many examples of “tax exporting” that states engage in. Tourism taxes—such as hotel, car rental, and meal taxes—also disproportionately impact nonvoting nonresidents who have few means of redress. As a result, states that generate substantial amounts of tax revenue from tourism may also show tax collections per capita that are higher than the actual tax burden that falls on the in-state population. Taxes on businesses may also be exported, at least in part, to investors across the country, and to employees wherever they are located.
It is important to keep both legal incidence and economic incidence in mind when evaluating the true costs of any tax. This helps explain why some states appear high-tax on a per-capita basis even when resident voters bear a relatively low share of the burden.
At the other end of the spectrum, with among the lowest collections per capita in the country, are Arizona and Tennessee. Arizona has a low, flat-rate individual income tax, while Tennessee imposes no individual income tax. Both rely more heavily on state and local sales taxes, with relatively higher average combined state and local sales tax rates of 8.52 and 9.61 percent, respectively.
Mississippi and South Carolina have recently enacted multi-year individual income tax rate reductions that rely on revenue triggers, with both states aiming to eliminate their individual income taxes altogether over time.
Each state has its own unique tax landscape. While outliers do exist, states with lower tax collections per capita have generally opted for a more limited government approach, pairing lower taxes with economic growth strategies focused on attracting residents, workers, and businesses.
