Wednesday, August 4

Local taxes are not higher in states without an income tax

From Kansas Policy Institute.

Local Taxes are NOT Higher in States Without an Income Tax

It’s been repeated so many times we don’t even need to think to believe it. “Low taxes at the state level will lead to higher taxation at the local level.” Conspicuously absent from this conjecture is evidence. Fortunately, the U.S. Census Bureau annually publishes State and Local Government Finances data, allowing a test of this theory.

Local taxes in the states without-an-income tax were $83 per resident lower than in the states with an income tax in 2010 (most recent data available). That bears repeating, states without an income tax, on average, have lower local taxes than states with an income tax.

State and local taxes, 2010

According to the Census data, Kansas local governments taxed $1,725 per person in 2010. Residents in states that do not have an income tax were, on average, taxed $1,763. The mere $38 in higher local taxes per capita is enormously overshadowed by the $479 overall lower state taxes.

Local governments eager to capture more revenue and opponents of tax reform have propagated the assertion that local taxes will be forced to rise as state spending is lowered. While the argument may be effective in teeing up a scapegoat for higher local taxes, it is not backed by the Census data.

The key to low taxes has never been alternative revenue, the key is low spending. KPI recently released a Legislator’s Budget Guide, detailing how Kansas can buy time and operate more efficiently in the long run.