Innovation
Major State and Local Taxes Paid by a Family
Description: This indicator estimates the dollar amount of state and local taxes paid by a hypothetical family of three (two income earners and a child) living in the largest city of each state. The figures are estimated at each of five income levels between $25,000 and $150,000. At the $25,000 level, the family is assumed to rent a home; at all other income levels, the family owns a single-family home. The taxes included are individual income, real property, sales and use, and automobile related (gasoline, vehicle registration, and excise and personal property taxes specific to automobiles).
The estimated amount of tax payments in dollars, the rank among the states, and taxes as a percentage of income are presented on the dashboard for Phoenix. Each annual figure is an average of the five income levels. The tax burden at the lowest income level in Phoenix is high relative to the other income levels, as measured by a higher share of income and a worse rank.
Rationale: All other factors equal, a lower tax incidence is a positive feature in attracting innovative firms and individuals. However, low taxes associated with few and/or low-quality public services are a negative factor in innovation.
Data Source: Government of the District of Columbia, Office of the Chief Financial Officer http://cfo.dc.gov/cfo/cwp/view,a,1324,q,612643.asp.
Comments on the Quality of the Data: The source warns not to compare results over time. Various methodological changes have been made since the first study in 1997. An error appears to have been made in the calculations for 2000. The results based on the simple averaging of the five income levels should be interpreted cautiously.
