In Montana the State and Local Governments collected $5,148 per person in 2021. The collections were 30th highest – in other words, 30 states collected more in tax revenues per person in 30 other states.
New York collected the most at $10,266. New York was, however, exceeded by Washington DC where collections were $13,278. California collects $9,175 per person.
State and local government in Alaska collect the least at $4,192 per person. Alabama was second to the last collecting $4,245 per person. Tennessee ranked 48th pulling in $4,272 in revenues for each citizen, followed by Florida at $4,405 in state and local government revenue collected per person.
Among Montana neighbors, North Dakota ranks the highest collecting $7,005 per person in state and local government taxes. Idaho ranks 41st, collecting $4,650 per person. Wyoming collects $5,213 per person, ranking it 28 and South Dakota ranks 38th, collecting $4,677 per person.
The Tax Foundation explained some of the figures stating, “Alaska is an anomaly here: while the state imposes incredibly low tax burdens on residents, its severance taxes generate substantial revenue that often yield relatively high collections per capita. FY 2021, however, captured a period of significant fluctuations in oil markets, from which the industry—and Alaska’s revenues—have since recovered. Similar effects are evident in other resource-dependent states, like North Dakota and Wyoming, which had markedly lower per capita collections in FY 2021 than in years prior, or (based on their own revenue data) since. These states export much of their tax burden, and there was simply less to export that year.”
The Tax Foundation further commented, “It’s worth noting that severance taxes are only one of many examples of the “tax exporting” that states engage in. Travel taxes—such as hotel, car rental, and meal taxes—also disproportionately impact nonvoting nonresidents who have few means of redress. As a result, states that generate substantial amounts of tax revenue from tourism may also show tax collections per capita that are higher than the actual tax burden that falls on the in-state population. Taxes on businesses may also be exported, at least in part, to investors across the country, and to employees wherever they are located. It is important to keep both legal incidence and economic incidence in mind when evaluating the true costs of any tax.
State and local governments fared well in FY 2021, but with all the ways our world has changed since the start of the pandemic, that feels like eons ago. Even though these maps are always limited by the timing of Census data releases, it’s fair to ask where things stand now. And fortunately, while we can’t go state by state, we do have quarterly data for the national aggregate of state and local tax collections through FY 2023.
Since FY 2019, the last full fiscal year before the pandemic, state and local tax collections have risen more than 27 percent. Much of that gain is subsumed by inflation, but even after adjusting for inflation, state and local tax revenues are more than 7 percent higher than they were pre-pandemic.
Revenues soared in FY 2021, jumping a full 10 percent (inflation-adjusted) higher than pre-pandemic figures, edging up even higher in FY 2022 (to 12 points up) before coming down to earth a bit in FY 2023. But this should not be alarming. Partly, it is a reversion to the mean: state revenues skyrocketed, and it’s okay for them to level off or even decline a little, as long as the new totals remain higher (in real terms) than before. Additionally, almost every state has adopted tax cuts since the start of 2021, including 25 that have cut individual income tax rates since then. Legislators wanted to return some of the revenue growth to the taxpayers—and even with that, revenues remain up in real terms.
Recent revenue declines, moreover, are concentrated in California and New York, high-tax states with intense reliance on high marginal income tax rates. Not only are these states more vulnerable to income fluctuations among high earners—an important source of volatility—but in an increasingly mobile environment, they’re driving some of those high earners to other states as well. While only state (not local) tax revenue data are available at a state-by-state level for more recent fiscal years, New York and California’s combined state tax revenue is up 2.9 percent in real terms since FY 2019, compared to 11.3 percent growth in the rest of the country.
