The Idaho State Tax Commission has published the latest tax burden study, which compares Idaho’s state and local taxes with those of other states and the District of Columbia.
Idaho ranks 37th in overall state and local tax burden nationally when measured by the percentage of income that goes to pay taxes. It ranks 48th when comparing taxes paid per person. (A ranking of 51 shows the lowest tax burden.)
Idaho also has the second lowest tax burden among 11 western states when measured by the percentage of income that goes to pay for taxes.
Idaho’s individual income tax burden remains slightly below long-term patterns, at 1.4 percent below the national average in FY 2015. Although historically still low, the relative burden of this tax is the highest since FY 2011.
Alan Dornfest, the Tax Commission’s property tax policy bureau chief, conducted the annual study based on data from fiscal year 2015, the latest year for which U.S. Census Bureau figures are available.
“Idaho’s state and local tax burden rankings haven’t changed significantly in recent years when compared with other states,” Dornfest said in a news release last week. He noted that readers should use caution in interpreting the results.
“The study reflects overall tax burden relative to other states,” Dornfest said. “It doesn’t reflect whether taxes are higher or lower than in other states for selected groups, such as high or low income taxpayers or small or large business.”
Corporate income tax burden is highly changeable, mostly due to variations in corporate taxable income. Looking at taxes paid in comparison to income, Idaho was 6.9 percent below the U.S. average in FY 2015, higher than the burden in FY 2014, but similar to the relative burden in FY 2013.
Idaho’s sales tax burden increased slightly in FY 2015 and is now 2.4 percent below the U.S. average.
Idaho’s property tax burden also increased slightly, but remained low at 19.8 percent below the U.S. average. Property tax burden is at its highest point since FY 2006.
Total nationwide state and local taxes for FY2015 were $1.5 million, up 5.1 percent since FY 2014. This was larger than last year’s 2.4 percent increase. Total personal income increased 4.5 percent to $14,991,944 million. The national average state and local tax rate increased slightly from 10.40 percent in FY 2014 to 10.45 percent of income in FY 2015, and is the highest since FY 2009.
In general states that typically over-utilize most or all of their taxes tend to be the ones with high tax burdens, especially relative to income. In FY 2015 the greatest overall tax overutilization relative to income and to other states, was found in New York at $55.8 billion, while the greatest amounts of underutilization were $21.2 billion in Florida and $18.8 billion in Texas.
The most significant overall tax burden change in FY 2015 was in Alaska. That state typically has high relative taxes, due to significant reliance on natural resource taxes. This component of Alaska tax revenue dropped by more than 90 percent between FY 2014 and FY 2015. As a result, Alaska’s overall tax burden relative to income plummeted from a rank of third to a rank of 51st.
Rank changes in other states tended to be minor, with no other state changing in rank by more than five places. Alaska also had a significant decrease in property taxes, with a rank change of negative 11 to relative to income and negative seven to relative to population. Colorado dropped five ranks in property tax burden relative to income.
The most significant individual income tax rank changes were in Illinois (-11) and Arkansas (-6). These changes were relative to income and there were no significant individual income tax changes relative to population. The greatest rank increases in corporate income taxes were in Rhode Island (+12) and Kansas (+10). Louisiana (-10), Colorado (-8) and North Dakota (-8) had significant corporate income tax rank decreases relative to income. Large income based rank changes in motor vehicle and motor fuel taxes occurred in Pennsylvania (+12), Vermont (-11), and California (-7).
Dornfest’s tax burden study is available on the Tax Commission’s website at tax.idaho.gov under the “Quick Picks” section.