Thinking Arizona
Facts to Inform the Public Discourse
Arizonans Contribute 15% Of Income to Tax Man
February 7, 2011
Arizonans hand over 15 percent of their income to government, paying a tax bill that amounts to $5,273 per capita.
Or at least that was the case in 2008, the most recent year for which full figures are available. The sum is subject to the idiosyncracies of the data sources that are used and to at least one middling-size assumption. But the figures provide a pretty good assessment of the overall tax bite, and how it compares to other states.
Thinking Arizona undertook this further analysis in response to the commentary over the pronouncement in Edition 3 that the state taxes paid per capita by Arizonans rank 44th in the country.
The analysis is subject to the same caveats as the original work. The per capita calculations are used to level the vastly different sizes of the 50 states,
even though in so doing they average in every man, woman and child. Some obviously pay little or nothing in taxes. Some pay a lot more. But on average, the 2008 tax bill looked like this:
- 25 per cent of the tax take, or $1,329, went to local governments and school districts via property taxes and local sales taxes. With local governments not charging sales tax in 18 states, the national per capita figure was $1,524. Arizona ranked 28th of the states.
- 28 per cent, or $1,475, went to the state government general fund via a variety of taxes, notably sales and income taxes. (Readers who are following closely will notice that this figure differs a bit from the $1,302 reported for 2010 in the main story of Edition 3. The dip reflects the effects of the economic downturn.) The national figure in 2008 was $2,203. Arizona ranked 44th of the states in 2008 just as it did in 2010.
- 47 percent, or $2,469, went to the federal government via income taxes. The national figure $3,416. Arizona ranked 37th in the country, a little higher than one might even expect given Arizonans’ income. Their per capita earnings of $34,209 ranked 41st.
Where in total does this put Arizonans?
38th in Per Capita Tax Burden
States divvy up certain responsibilities with local jurisdictions differently. Some states take more of the burden; others push it down to cities, counties and school districts. If one aggregates state and local taxes, the Arizona per capita tax burden ranked 38th.
If one adds in federal taxes to create a grand total, the result is the same. Arizona’s per capita total of $5,273 compares to the national figure of $7,143. All in, Arizona still ranked 38th.
The results can be adjusted to factor in the relative wealth of the states. It stands to reason, for instance, that the taxes paid in Arizona should be less than in the Northeast, where wages and property values are higher. What happens when total taxes are expressed as a percentage of personal income?
It doesn’t change Arizona’s relative positioning all that much. The state’s residents paid 15 percent of their income in taxes. Several of the Northeast states were north of 20 percent. But down the list just a little is New Mexico, which ranked 10th at 18.5 percent. Arizona’s 15 percent ranked 36th.
The federal tax data provides the means to make one last set of calculations. It records the number of tax returns, and within that the number of joint returns, filed by state. We can readily hypothesize that the filers and their spouses represent almost all income and almost all taxes paid in each state. Thus, the number of taxpayers becomes an alternative to population for making per capita calculations.
Evaluating Per Taxpayer vs. Per Capita
For the record, 2.7 million tax returns were submitted to the U.S. Government by Arizonans for the 2008 tax year. Of these, 1.05 million were joint returns. That means Arizona had 3.75 million “federal taxpayers” in its population, which in 2008 was estimated by the Census Bureau at 6.5 million.
The percentage of taxpayers equaled 58 percent of the population, which was the second lowest rate in the country. Five states were above 70 percent. Only Mississippi’s 57 percent was lower than Arizona.
Another way to think about this would be that Arizona’s estimated population in 2008 ranked 15th. Its number of taxpayers ranked 19th. The reason for that bears future exploration.
The disparity causes Arizona to leap over a few states in the per capita calculations of aggregated state and local taxes. When the divisor is changed from population to federal taxpayers, Arizona goes from coming in 38th per capita to ranking 32nd per taxpayer.
