In Fiscal Year (FY) 2016, state and local governments in the United States collected an estimated $1,593,248,177,000, or $1.6 trillion, in state and local taxes. The list of taxes include property taxes, sales and excise taxes, individual and corporate income taxes, licenses, and severance taxes to name a few. While this is an impressive sum of money, it tells us little about whether or not the average American taxpayer can afford this level of taxation.
In order to compare the burden of tax systems across states, there must be a common yardstick. The most common yardstick is to measure tax collections against the size of the economy as defined by total private sector share of personal income (which is personal income minus government compensation and personal current transfer receipts [Social Security, Medicare, and Medicaid]). Based on this metric, state and local taxes consumed 14.3 cents our every dollar earned in America, or 14.3 percent of personal income in FY 2016. And the tax burden has grown by a whopping 65 percent to 14.3 percent in FY 2016 from 8.7 percent in FY 1950.
Having a clear understanding of the tax burden is important because taxes matter to the countless number of economic decisions made everyday in our economy. Taxes influence the location of businesses, where people shop, and the wealth of nations. Unfortunately, many taxes are hidden and make it nearly impossible for the average American to understand. The goal of the analysis presented here is to shed light on America's tax burden so that taxpayers and policymakers can make better decisions.
Note: Local FY 2016 tax data is extrapolated based on a 5-year linear projection.
Be sure to check out our tax burden analysis by state (black text = forthcoming): Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington West Virginia Wisconsin Wyoming