Tax collections vary widely across the district

Toby Madden | Regional Economist

Published March 1, 2003  | March 2003 issue

Like the office flu bug, there's no avoiding taxes, and there are a lot of different ways both can catch you. But the bite is more severe in some district states than in others.

State tax collections include all state property, sales, income and other taxes and license fees. Minnesota ranked fourth nationally in 2001 in state tax collections per capita ($2,722), which was 38 percent higher than the national average of $1,969. State tax collections correlate with personal income, and Minnesota's tax collections are explained largely by the state's relatively high per capita personal income (8th in the nation), which increases the volume of income and sales taxes paid. Connecticut had the highest state tax collections in the nation at $3,092 per person and the highest personal income at $42,435 per person.

Meanwhile, Montana, with tax collections per capita of $1,654, ranked 40th, primarily because of the state's low personal income, 46th in the nation. In addition, the state does not collect general sales taxes, an issue that is discussed in virtually every legislative session. Proponents of a sales tax cite the potential state revenue gleaned from the steady stream of travelers to and through the state.

Chart: Per Capita 2001 Total Tax Collection
Note: Data for Michigan and Wisconsin are statewide.
Sources: U.S. Internal Revenue Service and Census Bureau.

South Dakota ranked 50th, dead last at $1,292 per head, or 34 percent below the national average, due to the absence of individual income and property taxes. Furthermore, South Dakota's personal income is 12 percent below the national average.

While much of the focus is currently on state taxes as legislatures struggle to balance budgets, it is important to note that the federal tax collections are about four times state levels.

Federal tax collections, consisting of personal, corporate, excise and inheritance taxes, varied significantly across the district. Minnesota ranked third in the nation for federal tax collections per capita ($11,489), 35 percent above the national average of $7,461. Meanwhile Montana ranked 47th at $3,732 per head. The disparity between Minnesota and Montana can primarily be explained by the difference in worker earnings, and corporate and personal income levels. Delaware had the highest federal tax collections at $12,761 per capita; the lowest collections were in West Virginia at $2,829.