Updated March 27 at 10:58pm

Tax Foundation ranks R.I. tax burden 6th highest in 2010


WASHINGTON – Rhode Island’s state and local tax burden was the sixth highest in the nation in 2010, according to a report released by the Tax Foundation on Tuesday.

The Tax Foundation calculated, for each state, the total amount paid by the residents in taxes and then divided those taxes by the state’s total income to compute the figure.

Rhode Island’s state-local tax burden was 10.9 percent, followed closely behind Wisconsin, at 11.1 percent and California at 11.2 percent.

Residents of New York, New Jersey and Connecticut gave up more of their income in state and local taxes than the rest of the nation, with tax burdens of 12.8 percent, 12.4 percent and 12.3 percent, respectively.

The U.S. average combined state and local tax burdens increased slightly in fiscal year 2010, rising to 9.9 percent from 9.8 percent – but down “significantly” from 1977’s average of 10.3 percent, the first year the foundation took estimates.

According to the nonpartisan tax policy research group, fluctuations in the national average have been small in recent years, but tax burdens among states vary widely.

Alaskans pay 7 percent of their incomes in state and local taxes, 45 percent less than the residents of New York state.

“Some states are able to shift significant portions of their tax burdens to nonresidents, with Alaska being the most aggressive. The Last Frontier is able to export over 75 percent of its tax collections to residents of other states, by virtue of taxes on oil extraction,” Tax Foundation economist Elizabeth Malm said in prepared remarks.

“Resource-rich states, such as Alaska and Wyoming, are only the most dramatic examples of tax exporting. Major tourist destinations like Nevada and Florida are able to lower residents’ burden by taxing tourists, who are often nonresidents,” said Malm, adding: “Nationwide, over a quarter of all state and local taxes are collected from nonresidents.”

The Tax Foundation said its study includes the in-state taxes residents are subject to as well as the taxes they pay to other states, by working in, traveling to or buying products in other states. The study is reflective of the individual taxpayer while other measures focus on state-by-state revenue and reflect the perspective of a state’s tax collectors.

For Rhode Island, total taxes paid per capita were calculated at $4,112; $3,055 to the home state and $1,056 to other states. Income per capita was calculated at $42,628, ranking 16th highest in the U.S.

Previously, the Ocean State’s tax burden ranked fifth in 2009, but seventh in both 2008 and 2007. In 1977, it stood at 11.3 percent and ranked 8th in the nation.

Massachusetts’ tax burden, at 10.4 percent, ranked 8th in 2010. In the Bay State, total taxes paid per capita were calculated at $5,422; $3,987 to Massachusetts itself and $1,435 to other states. Income per capita was calculated at $51,991, the third highest in the country behind Connecticut and New Jersey, respectively.

To access the Tax Foundation report, visit: www.taxfoundation.org.


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