US State And Local Taxes Hit Record High

by Mike Godfrey, Tax-News.com, Washington

06 April 2007

In a year when the nationwide burden of state and local taxes hit an all-time high of 11% of income, Vermont's taxpayers are bearing the heaviest load in 2007, according to the annual study of state and local taxes by the Tax Foundation.

With 14.1% of income going to pay all state and local taxes, Vermont was ranked ahead of Maine (14%) and New York (13.8%) as the state with the highest tax burden.

Falling significantly behind the leaders were Rhode Island and Ohio, while Hawaii rounded out the top six as the state continues to fall in the rankings, the Tax Foundation reported.

Not much has changed at the bottom where Alaska has retained the lowest tax burden every year this decade. New Hampshire, Tennessee, Delaware and Alabama complete the list of the five lowest tax burdens — no changes from last year.

Since 2000, five states have experienced double-digit drops in their tax burden rankings. New Mexico has dropped 29 places, Idaho 23 places, and Utah 19 places. Georgia and North Dakota have dropped 15 and 10 places, respectively.

New Jersey has seen the highest increase since 2000, jumping from twenty-fourth to tenth. Arkansas and Indiana have both risen ten places.

Overall, state and local tax burdens will consume fully 11% of the nation's income in 2007 - a new record according to the Tax Foundation. The previous high occurred in 2005 at 10.9%.

"Due to the booming economy, people are paying more taxes — particularly those in states with graduated income tax rates," says the author of the study, Curtis Dubay.

"Property tax is also a significant source of revenue. As property values rise, so do tax collections," Dubay added.

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