Recent analysis from the Tax Foundation says property taxes remain by far the most important source of local revenue in the U.S, generating about 72% of local tax collections. Their research sheds light on the current state of two major revenue sources for local governments in the U.S. (after property taxes). In addition they provide a descriptive analysis of the most recent local tax data.
Some key findings:
- Local sales and income taxes generate 13% and 5% of local tax revenue.
- Local income taxes are authorized in 16 states and the District of Columbia.
- Localities in only seven states do not impose either local income taxes or local sales taxes.
- In many states, local income and sales taxes lack uniformity, making the tax system nonneutral and potentially incentivizing residents to make costly or economically inefficient relocation or cross-border shopping decisions.
“…state and local policymakers are constantly searching for other revenue sources that could potentially reduce the property tax burden and substitute for foregone property tax revenues. Many states have tried two alternatives: local income taxes and local sales taxes. But how do these taxes contribute to overall state and local tax competitiveness? Should one be preferred over the other? Is consumption or income a better tax base for local governments? What are the advantages and disadvantages of both?”
Click here to read the full report at the Tax Foundation.
