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February 9, 2016

Vermonters shoulder 11th highest state-local tax burden in U.S.

Vermonters shoulder 11th highest state-local tax burden in U.S.

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Shades of green represent annual State-Local Tax Burden as a percentage of State income for FY 2012, with lighter shades representing lower, and darker shades representing higher percentages.

Vt. ranks mid of New England states, 0.4 percent higher than U.S. average

In Vermont 10.3 percent of total resident income went toward state and local taxes in FY 2012, according to the annual State-Local Tax Burden Rankings released Jan. 20, 2016, by the nonpartisan Tax Foundation. The U.S. average was 9.9 percent.

The report highlights the state-local tax burden on taxpayers in each of the 50 states, details how much residents pay to their state and other states, and illustrates tax burden trends over time and within each state.

Here is a breakdown of Vermont’s state-local tax burden:

  • State-local tax burden rank in U.S.: 11th
  • State-local tax burden rank in New England: 3rd (Connecticut, 12.6 percent; Rhode Island, 10.8 percent; Vermont and Massachusetts, 10.3 percent; Maine, 10.2 percent; New Hampshire, 7.9 percent.)
  • Percent of income that goes to state and local taxes: 10.30 percent
  • State-local tax burden per capita: $4,557
  • Taxes paid to Vermont per capita: $3,129
  • Taxes paid to other states per capita: $1,428
  • Average income per capita in Vermont: $44,337

“There’s an ongoing debate over how much is enough when it comes to taxes, but it isn’t always informed by accurate data,” said Tax Foundation economist Nicole Kaeding. “Our study gives taxpayers a comprehensive look at where tax burdens are felt across the states, so that they can have an informed discussion on the size and reach of state and local taxes.”

The study’s key findings include:

  • During the 2012 fiscal year, state-local tax burdens as a share of state incomes decreased on average across the U.S. Average income increased at a faster rate than tax collections, driving down state-local tax burdens on average.
  • New Yorkers faced the highest burden, with 12.7 percent of income in the state going to state and local taxes. Connecticut (12.6 percent) and New Jersey (12.2 percent) followed closely behind. On the other end of the spectrum, Alaska (6.5 percent), South Dakota (7.1 percent) and Wyoming (7.1 percent) had the lowest burdens.
  • On average, taxpayers pay the most taxes to their own state and local governments. In 2012, 78 percent of taxes collected were paid within the state of residence, up from 73 percent in 2011.
  • State-local tax burdens are very close to one another and slight changes in taxes or income can translate to seemingly dramatic shifts in rank. For example, Maine (13th) at 10.2 percent and Colorado (35th) at 8.9 percent only differ in burden by just 1.3 percentage points. However, while burdens are clustered in the center of the distribution, states at the top and bottom can have substantially different burden percentages—e.g. New York (12.6 percent) and Alaska (6.5 percent).
  • Significant amount of taxation occurs across state lines and this shifting is not uniform, it is important to note. For instance, one might pay sales taxes at the local corner store, but also pay sales taxes when on vacation in another state. This shifting should not be ignored when attempting to understand the burden faced by taxpayers within a state.

For more information or to review the entire report visit http://taxfoundation.org/article/state-local-tax-burden-rankings-fy-2012

The Tax Foundation is the nation’s leading independent tax policy research organization. Since 1937, our principled research, insightful analysis, and engaged experts have informed smarter tax policy at the federal, state, and local levels.

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