Innovation
State and Local Government Taxes Paid
Description: This indicator estimates state and local government taxes as a percentage of income. All taxes — personal and business — are included. Taxes as a percentage of income, the rank among the states, and the percentage point difference from the national average are presented on the dashboard for Arizona.
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: The Tax Foundation http://www.taxfoundation.org/taxdata/topic/86.html.
Comments on the Quality of the Data: The Tax Foundation figures represent a projection of older data to the current year. The 2007 data were released in April 2007. The Tax Foundation does not provide details about the methodology they use. Concerns about the reliability of the Tax Foundation rankings have been expressed by Lav, Llobrera, and Johnson of the Center for Budget and Policy Priorities (http://www.cbpp.org/4-7-05tax.pdf), based on a comparison of prior Tax Foundation rankings with subsequent releases of U.S. Department of Commerce, Census Bureau estimates. The Census Bureau offers the most accurate measures of state and local taxation by type of taxation. However, the data are not released on a timely basis.
