(The Center Square) – Maine ranks fourth in the country when it comes to overall tax burden, according to a new analysis.
The Pine Tree State’s property tax burden ranks 4th, individual income taxes at 21st and total sales and excise tax at 20th according to personal finance website WalletHub’s 2021’s Tax Burden by State report.
WalletHub compared the states in property taxes, sales and excise taxes and individual income taxes as a share of a total personal income in the state.
WebHub financial writer Adam McCann said in the report a tax burden measures the proportion of personal income that residents pay toward state and local taxes, unlike tax rates, which vary based on an individual’s circumstances. Tax burdens aren’t uniform across the United States.
“Since the tax code is so complicated and has rules based on individual household characteristics, it’s hard for the average person to tell how they will be impacted,” McCann wrote.
The relationship between state tax burden and economic growth depends on the type of tax and other economic conditions, according to Annette Nellen CPA, Esq. and professor at San Jose State University.
“For example, if the state has tax and other incentives or favorable rules for a particular type of industry such as high tech, economic growth might be greater because more tech firms may locate or expand in the state,” she said in the report.
Additional factors should be considered beyond taxes because some states have a higher cost of living – such as for rent and home purchase – than other states which can easily discourage economic growth even if the tax burden is lower than in other states.
Philip Cary Christian, Ph.D. and associate professor at Georgia Southern University, told WalletHub income taxes fund public programs that may or may not provide a direct benefit to any one individual paying the tax, unlike for example, gas taxes that are one tax where the benefits received are related to what an individual pays.
He recommends states use a combination of taxes and fees, especially when recovering losses due to economic downturns, rather than relying on a single tax such as income tax.
“Both state and local governments hope for increased assistance from the federal government in the form of intergovernmental revenue,” he said. “But that did not happen in most states I reviewed during the Great Recession.”
The report indicated that Republican-leaning states have a lower tax burden than Democrat-leaning states, with Blue states overall getting a 19.32% rate compared to Red states at 31.36%.