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1 Liz Malm & Gerald Prante, State-Local Tax Burden Rankings: Methodology 1 (2016)

handle is hein.taxfoundation/stloburk0001 and id is 1 raw text is: FOUNDATION WORKING PAPER Jan. 2016 No. 10 The Tax Foundation is a 501(c)(3) non-partisan, non-profit research institution founded in 1937 to educate the public on tax policy. Based in Washington, DC, our economic and policy analysis is guided by the principles of sound tax policy: simplicity, neutrality, transparency, and stability. @2016 Tax Foundation Distributed under Creative Commons CC-BY NC 4.0 Editor, Melodie Bowler Designer, Dan Carvajal Tax Foundation 1325 G Street, NW, Suite 950 Washington, DC 20005 202.464.6200 taxfoundation.org State-Local Tax Burden Rankings Methodology By Liz Malm and Gerald Prante Section A. Methodological Overview and Data Sources A state's state-local tax burden is the total amount residents of that state pay in state and local taxes, even if some of those payments go to out-of-state jurisdictions. Our measure expresses this tax burden as a proportion of total state income. This means that two broad statistics are needed to make the calculation for each state: total state and local taxes paid by state residents (what we call the tax burden) and total state income. For the tax portion, the first step is to convert tax collections by state, as reported by the Census Bureau's Government Finance Division,' to total state and local taxes paid by residents of each state, even if those taxes are paid to out-of-state jurisdictions. Each tax collection amount from the Census Bureau is first divided into categories, such as property taxes being narrowed to personal property or property taxes on business property, to ensure the most accurate final tax burden estimates can be calculated. Then, the collection figures are allocated to states via a variety of methods. In some instances, the collection amount is assumed to be borne fully by the residents of the collecting state. In others, the amount collected is allocated to other states. Section B contains a detailed overview of what types of taxes are included in the total taxes paid measure, in addition to detailed descriptions of incidence assumptions and allocation methods for each tax subcomponent. A similar procedure is completed for the income portion. National totals are taken from the Bureau of Economic Analysis (BEA) and then allocated to states based on some allocator. For the definition of income used in this study, in addition to descriptions of incidence assumptions and allocation methods for each subcomponent of income, see Section C. Before interpreting the figures in this piece as definitive measures of the degree of state and local tax exporting, one should note that the estimates presented here do not account for the federal deductibility of state and local taxes paid within the federal individual and corporate tax codes. Accounting for such deductibility is a goal 1 The Census Bureau's Government Finance Division encompasses four separate data sources: State Government Finances (http://www.census.gov/govs/state/); State Government Tax Collections (http://www.census.gov/govs/ statetax/), State & Local Government Finance (https://www.census.gov/govs/local/), and Quarterly Summary of State & Local Taxes (http://www.census.gov/govs/qtax/).