Economists say Louisiana ranks as one of the top five states that places the smallest tax burden on their residents.
Economists said Monday Louisiana ranks as one of the top five states that places the smallest tax burden on their residents. Tax burdens measure how much residents contribute to in-state taxes and how much they spend on taxes to other states, which can include purchases made while on vacation or by people who work in other states. The sum of that tax total is then divided by the state's total income.
A man enters the Internal Revenue Service building in Washington. Andrew Harrer / Bloomberg
The Tax Foundation, a nonprofit research organization based in Washington, D.C., has released a study saying that while state and local tax burdens have increased from 9.3 percent to 9.9 percent since 2000, the burdens have remained stable during the 2010 fiscal year.
Elizabeth Malm, an economist at the Tax Foundation, says some states are able to shift much of their tax burdens to nonresidents, and thereby save their own locals from a hefty bill from the tax collector.
Alaska leads the way for the states that taxes its residents the least, followed by South Dakota, Tennessee, and Louisiana. Malm says resource-rich states, like Alaska, are able to export a significant portion of their tax collections to residents in other states by virtue of taxes on resource extraction.
Other states with large tourist draws, like the gambling haven of Las Vegas in Nevada or the amusement parks that pepper Florida, are able to lower their own tax burdens by taxing vacationers and travelers, she said.
Tax collectors will collect and register the receipts from lodging, rental cars, restaurants, and general sales in Florida and Nevada, but count those toward the total tax tallies in the home states of those tourists.
"Nationwide, over a quarter of all state and local taxes are collected from nonresidents," she said.
Louisiana improved between the fiscal years 2009 and 2010, Malm, said, when it moved its tax burden from 8.2 percent of income to 7.8 percent.
"From our analysis, we found that both total taxes paid and incomes for Louisiana decreased between 2009 and 2010, but taxes paid decreased by a much higher percentage," she said.
This in turn translated into a better tax burden ranking for the state, when it jumped from its rankings at 43 to 47 in a survey that puts states with higher tax burdens up higher. She said the state doesn't have a stark example that could illuminate why tax burdens have dropped in the state.
They were still able to pin down that Louisiana was able to export a large amount of its total tax collections to nonresidents, likely because it collects a majority of tax revenue from sales taxes and property taxes.
Louisiana had the country's smallest tax burden when the Tax Foundation began their annual study in 1977. While it has fluctuated in the rankings, it has always maintained a spot in the top 10 states with the smallest tax burdens.
Residents in New York, New Jersey and Connecticut paid the highest tax burdens in the country, and are the only three states where resident taxpayers pay 12 percent of their income to state and local taxes.