NC Ranks 17th In Taxes

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NC Ranks 17th In Taxes

Special Report - October 26, 2012
A new report from the Tax Foundation comparing state and local tax burdens on residents of all 50 states finds that the average tax burden on citizens has grown since 2000 with North Carolinians paying the 17th highest 2010 state-local taxes in the nation. The Annual State-Local Tax Burden Ranking, which was released this month, computed the average combined state and local tax bill paid by the residents of each state. Unlike other similar reports, this analysis focuses on the tax burden incurred by taxpayers, rather than on the revenue collected by state and local governments.

Overall, citizens’ tax burdens have increased from 9.3 percent to 9.9 percent since 2000 with a slight decrease between 2009 and 2010. Residents of New York, New Jersey, and Connecticut were the only ones in the country to pay more than 12 percent of their income in state and local taxes in 2010. Alaskans maintained their nearly 30 year position at the bottom of the tax burden rankings, paying just 7 percent of their income in state and local taxes. Interestingly, the state-local tax burden for the middle 20 states only differs by slightly more than one percent.

North Carolina ranked 17th with residents paying 9.9 percent of their annual income to state and local taxes. Prior to this report, the state-local tax burden on North Carolinians has stayed at 10 percent since 2006, with 2008’s 10.2 percent rate as the only exception. Those tax burden rates have ranked North Carolina 17th, 15th, 14th, and 16th in 2006, 2007, 2008, and 2009, respectively. North Carolinians’ 2010 tax burden breaks down as follows:

$3,535 total taxes paid per capita on an average per capita income of $35,659;
$2,648 of those total taxes paid in the state of North Carolina;
$887 of those total taxes paid in other states.

According to the report, the national average state-local tax burden has fallen from 10.3 percent in 1977 to 9.9 percent in 2009. Most recently, the nation’s tax revenues “have remained fairly stable from 2009 to 2010, recovering from a sharp decrease in the previous year due to the peak of the nationwide economic recession.” The shrinking economy had the effect of significantly lowering state and local tax collections in 2009. Only property tax revenue increased in 2010. Corporate tax collections dropped 6.8 percent. Income tax revenue fell 3.8 percent, while sales tax revenue dipped by a slight 0.5 percent. This is only the second time since 1977 “that total tax collections have fallen.”

Arkansas, Connecticut, Indiana, and Ohio taxpayers have experienced the greatest increase in their state and local tax burden since 1977. Alaska, North Dakota, the District of Columbia, and Arizona taxpayers have benefited from the greatest decreases in their state and local tax burdens over the last 30 years.

Related resources:
Principled Tax Reform - October 23, 2012
Taxmageddon Draws Closer - August 22, 2012
Tax Freedom Day Arrives - April 18, 2012
Report Says NC Tax Reform Needed - April 10, 2012
North Carolina Over-Taxed - February 3, 2012
Benefits Abound from Lower Taxes - May 17, 2011
Squeezing Families: How Expanding Government Undermines the Family - FNC - Fall 2010
NC Leads in Tax Increases - January 19, 2010
North Carolina’s Entrepreneurship Ranking - December 31, 2009
Report Says NC Tax Eighth Highest - October 27, 2009
Tax Policy, Marriage, and the Family - FNC - Fall 2006