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New Jersey Faces 3rd Highest State-Local Tax Burden In U.S.

12.2 Percent of Income in New Jersey Goes to State and Local Taxes

Washington, DC (Jan 20, 2016)—12.2 percent of all income in New Jersey went toward state and local taxes (in FY 2012), according to the annual State-Local Tax Burden Rankings released this morning by the nonpartisan Tax Foundation.

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 New Jersey’s state-local tax burden:

  • State-Local Tax Burden rank: 3rd
  • Percent of income in New Jersey that goes to state and local taxes: 12.20%
  • Amount of taxes paid to New Jersey per capita: $4,876
  • Amount of taxes paid to other states per capita: $2,050
Table 1.
State-Local Tax Burdens by State (with Detailed Breakdown), Fiscal Year 2012
State State-Local Tax
Burden as a Percent of State Income
Rank State-Local
Tax Burden
per Capita
Taxes Paid to Own State
per Capita
Taxes Paid to Other States
per Capita
Income
per Capita
U.S. Average 9.9% $4,420 $3,238 $1,213 $44,481
Alabama 8.7% 39 $3,067 $2,142 $925 $35,337
Alaska 6.5% 50 $3,229 $1,986 $1,242 $49,780
Arizona 8.8% 36 $3,276 $2,283 $992 $37,012
Arkansas 10.1% 17 $3,519 $2,552 $967 $34,862
California 11.0% 6 $5,237 $4,126 $1,111 $47,808
Colorado 8.9% 35 $4,304 $2,968 $1,336 $48,313
Connecticut 12.6% 2 $7,869 $5,516 $2,354 $62,374
Delaware 10.2% 16 $4,412 $2,610 $1,802 $43,437
Florida 8.9% 34 $3,738 $2,499 $1,240 $41,848
Georgia 9.1% 32 $3,426 $2,446 $980 $37,478
Montana 8.7% 38 $3,389 $2,172 $1,216 $38,980
Nebraska 9.2% 30 $4,197 $2,930 $1,267 $45,485
Nevada 8.1% 43 $3,349 $2,051 $1,298 $41,297
New Hampshire 7.9% 44 $3,961 $2,173 $1,789 $50,288
New Jersey 12.2% 3 $6,926 $4,876 $2,050 $56,731
New Mexico 8.7% 37 $3,141 $2,170 $971 $36,051
New York 12.7% 1 $6,993 $5,588 $1,406 $55,047
North Carolina 9.8% 20 $3,659 $2,707 $952 $37,523
North Dakota 9.0% 33 $4,867 $3,349 $1,518 $53,953

It’s important to remember that a significant amount of taxation occurs across state lines, and that this shifting is not uniform. For instance, one might pay sales taxes at their 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.

“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.”

Table 2.
State-Local Tax Burdens as a Percent of State Income by State, Selected Years
Fiscal Year 2012 Fiscal Year 2011 Fiscal Year 2010
State State-Local
Tax Burden as a Percent of State Income
Rank State-Local
Tax Burden as a Percent of State Income
Rank State-Local
Tax Burden as a Percent
of State Income
Rank
U.S. Average 9.9% 10.1% 10.4%
Alabama 8.7% 39 8.9% 39 9.0% 39
Alaska 6.5% 50 6.8% 50 7.1% 50
Arizona 8.8% 36 8.9% 36 9.0% 40
Arkansas 10.1% 17 10.4% 11 10.6% 13
California 11.0% 6 11.5% 4 11.7% 4
Colorado 8.9% 35 9.0% 35 9.3% 35
Connecticut 12.6% 2 12.2% 2 12.6% 3
Delaware 10.2% 16 9.7% 20 9.5% 31
Florida 8.9% 34 9.2% 31 9.8% 25
Georgia 9.1% 32 9.2% 33 9.3% 33
Montana 8.7% 38 8.9% 37 9.3% 36
Nebraska 9.2% 30 9.6% 22 10.0% 19
Nevada 8.1% 43 8.2% 43 8.7% 42
New Hampshire 7.9% 44 8.0% 44 8.6% 44
New Jersey 12.2% 3 12.1% 3 12.7% 2
New Mexico 8.7% 37 8.9% 38 9.0% 41
New York 12.7% 1 12.7% 1 13.0% 1
North Carolina 9.8% 20 10.1% 16 10.3% 18
North Dakota 9.0% 33 9.2% 32 9.3% 32

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% of income in the state going to state and local taxes. Connecticut (12.6%) and New Jersey (12.2%) followed closely behind. On the other end of the spectrum, Alaska (6.5%), South Dakota (7.1%) and Wyoming (7.1%) 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, Delaware (16th) and Colorado (35th) only differ in burden by just over one percentage point. 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%) and Alaska (6.5%).

New Jersey Faces 3rd Highest State-Local Tax Burden In U.S.

The residents of three states stand above the rest, experiencing the highest state-local tax burdens in the country: New York (12.7 percent of state income), Connecticut (12.6 percent), and New Jersey (12.2 percent). These are the only three states where taxpayers forego over 12 percent of their total collective income to state and local taxes. This is over one percentage point higher than the fourth highest burden, in Wisconsin, of 11.0 percent of state income.

New York, Connecticut, and New Jersey have occupied the top three spots on the list, albeit not always in the same order, for several years. This may be partially attributed to high expenditure levels, which must be sustained by high levels of revenue. Furthermore, in the case of Connecticut and New Jersey, relatively high tax payments to out-of-state governments add to already high in-state payments. This is likely related to the fact that these are high-income states whose residents experience high levels of capital gains. High levels of capital gains will result in residents paying an increased share of other states’ business taxes.

 

New JerseySee the full report here.

About The Tax Foundation

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.