Everybody talks about taxes, but who is really doing anything about them?
The Tax Foundation, a “nonpartisan educational organization” whose mission “is to educate taxpayers about sound tax policy and the size of the tax burden borne by Americans at all levels of government“, has some interesting figures in its Special Report No. 163, State-Local Tax Burdens Dip As Income Growth Outpaces Tax Growth, showing the State and local tax burdens for the Fiscal Year 2008.
A table from that Special Report shows the State and local tax burdens for each State of the United States, which are ranked by tax burden and reproduced by the Tax Foundation in a national map which we reproduce here in smaller size (see the original for best results):
The national figures for State and local tax burdens tell us what we already knew: namely, that State and local tax burdens – because they finance similar services nationwide – are relatively uniform across the entire United States, averaging 9.7% of income per State for the Fiscal Year 2008. But there are some significant differences. New Jersey averages the highest, at a tax burden of 11.8% of income, i.e. 2.1% above the national norm, while New York State at 11.7% and Connecticut at 11.1% are close behind. Those three also rank at the top in education, as Peter Schrag of The New Press in his New York Times Book Review of Paradise Lost (California) wrote ten years ago:
“California’s schools, which, thirty years ago, had been among the most generously funded in the nation, are now in the bottom quarter among the states in virtually every major indicator–in their physical condition, in public funding, in test scores–closer in most of them to Mississippi than to New York or Connecticut or New Jersey“. [special color and emphasis added]
In spite of higher State and local tax burdens since that writing, California has remained in serious financial trouble, but not because of inappropriately high State and local taxes. In fact the California State and local tax burdens are only minimally above the national average of 9.7% at 10.5%, and they are a full 1.3% behind New Jersey and 1.2% behind New York State.
To the amazement of the financial world, however, Californians have just turned down tax increases to deal with their massive $24 billion State budget deficit and there is already talk of a federal “bailout” for the California “failout”. We see no justification as to why the rest of the USA should step in and pay for the financial excesses of a State that easily has the means to correct their deficit through reasonable but higher State and local taxes, but now has refused to pay its own way.
As California Governor Arnold Schwarzenegger has correctly indicated, you can’t solve that kind of a massive budget deficit simply by cutting the budget of what are often necessary services. Quite the contrary, cutting the budget to deal with that deficit simply means social disturbances on an unnecessary scale, even more unemployment and even more business disadvantages. This is a case which shows that State’s Rights is a fata morgana. When push comes to shove, everyone looks to Washington D.C. to bailout their failout. Put into different terms, financially successful States are having to pay to bail out financially unsuccessful States, or, better defined, States with means who are not paying their own way.
At the other end of the scale, Alaska averages the lowest tax burden, at 6.4%, i.e. 3.3% below the national norm, followed by Nevada at 6.6%. But those figures are by no means signs of a sensible State and local tax policy.
Alaska has about the same population as Forth Worth, Texas (around 700,000) and its average income is about the same as the average income for all of the United States (around $44,000 per year). But if it were not for federal funding, Alaska would have some serious problems. As, for example, written at AAAS.org about the Future of Science & Technology in Alaska:
“Federal funds account for nearly three-quarters of Alaska’s R&D, while industry and universities and colleges each provide about 13 percent of the total. This breakdown contrasts sharply with the national picture, in which industry is the principal source of R&D funding (about 60 percent nationwide) and the federal government provides just over one-third of the total.” [special color and emphasis added]
Alaskans may have lower State and local tax burdens – but at the cost of other States. As for the field of education, we have friends whose son teaches in rural Alaska, where supplies are flown in by bush planes, because there are no suitable roads. No taxes, no roads.
In Nevada, along the same lines, as reported recently at the Heartland Institute:
“A bill introduced in the Nevada state legislature this spring proposes requiring the state to increase its K-12 spending to match the national average of $9,332 per student. That’s about $2,000 more per student than the state currently spends.“
But perhaps Nevada is more happy with the Nevada described in the Wikipedia:
“Nevada … has … overcrowded schools … the state has seen rising crime levels, and problems with transportation (according to state figures, there is a 1 billion dollar shortfall in funds for road construction projects in Nevada). Most recently, there has been news of water shortfalls in southern Nevada in the years to come, due to the population increase, and the Southern Nevada Water Authority estimates that there will be water shortages by the year 2020. The authority is working on plans to import water from the low populated area of northern Nevada.“
You get what you pay for.