Hat tip to Adam Graham over at Adam’s Blog for pointing me to this report.
The National Tax Foundation released their state rankings for 2008 and included the state rankings for 2003 through 2007 as well. Tennessee, by virtue of its lack of a state income tax, shows in the mid teens for all 6 years. We ranked either 15, 16 or 17 in these years and are currently at 16th in the nation overall.
I thought I would look at the numbers for the last couple of years and examine the top and bottom of the country’s state rankings. 2005 data is not listed. I don’t know why.
2004 2006 2007 2008
#1 WY WY WY WY
#2 SD SD SD SD
#3 NV NV NV AK
#4 AK AK AK NV
#5 FL FL FL FL
TX #6 #6 #6 #8
TN #17 #15 #17 #16
IL #25 #29 #27 #28
#46 VT CA CA OH
#47 NJ OH NJ CA
#48 OH NJ NY NY
#49 RI NY OH NJ
#50 NY RI RI RI
At first glance, the observation that comes to mind is that the top 5 states listed have no income tax. According to Right Mind, 7 of the top 10 do not have an income tax. The Red State/Blue State comparison is interesting as is the geographic breakdown. Evidently, the bluer one gets the higher ones taxes. Only Florida is out of the NW or Northern Plains area for the best ranked states and only Vermont and Ohio are not one of the original 13 colonies. Evidently these states are farther down the road from Faith, Courage, Liberty and Abundance to Complacency, Apathy, Dependence and Bondage. I hope I don’t live long enough to see th rest of the country follow that road.
The study takes into account a variety of taxes for each state. This contributes to the different rankings. The taxes used to evaluate a state are:
Corporate Taxes
Individual Income Taxes
Sales Taxes
Unemployment Insurance Taxes
Property Taxes
Thus while a state may rank high in the Income Tax category, such as Tennessee, our other taxes bring our overall ranking down. But the overall rankings are still interesting to see how the states wash out. For instance, TN is comfortably in the top third overall for 2008 due to being 8th for Income Tax while 48th for Sales Tax. While it is bad being 48th, the state must still raise revenue for its budget. That it does so via a Sales Tax as opposed to an Income Tax is not only good for rankings but good for Tennesseans! We could be living in NY which enjoys its bottom of the barrel rankings due to being 41st in Income Tax and 49th in Sales Tax. NY citizens get hammered on both counts. In fact, NY ranks in the bottom 10 for every tax category except its 23rd showing in Corporate Tax. The rankings for OH, RI and NJ share similar influences. They are the worst in virtually every category of tax. The final rankings for those states involve better Unemployment Tax rates.
Population density seems to play some sort of role. NY and CA have the country’s two largest cities and they fare poorly. CA has several of the cities in the top 100 cities ranked by population by the Census Bureau in 1990. By contrast, the 4 states at the top of the rankings only have 2 cities in the top 100, Anchorage and Las Vegas. Both of those cities rank in the 60s with populations a little over 250,000 each.
The bottom line is that the worst tax situations for citizens come from heavily Democratic states and the best come from traditionally Republican states. Those states that deem high taxes are a good thing generally apply that opinion to most of the taxes they collect.
For Tennessee, we could improve our rankings by lowering 3 taxes – Sales (48th), Property (35th) and Unemployment (31st).
I’d love to see lower rates in all three areas. It would make our state even more attractive to business and manufacturing which would be good for job growth. It would expand our population base as people move here to enjoy lower taxes. Hopefully it would change the state’s makeup enough that the Democrats would lose even more influence even in traditionally Democratic strongholds like Nashville and Memphis. Of course, we’ll need to make sure the folks gaining influence are Conservatives who will maintain the low-tax, less government, more personal freedom approach that will provide such a change. Time will tell.
Thinking that being Sweet 16 in the rankings leaves us just 6 slots from the Top Ten …
Blue Collar Muse
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