State-Local Tax Burden Rankings: Methodology WN PAPER

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State-Local Tax Burden Rankings: 
Methodology
By Liz Malm and Gerald Prante
Jan. 2016 
No. 10
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,1 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/). 
2
for future state and local tax burden estimates because the deductibility is not uniform across 
geographies for a variety of reasons, most notably varying state and local tax policies, which 
minimize the effect of taxation, particularly for high-income individuals due mostly to the 
progressivity of the federal individual income tax.
An ideal tax burden study would include compliance costs and economic efficiency losses 
associated with taxation. Neither is included here. As a result, this study assumes that the total 
economic cost of taxation is equal to the tax burden. In a perfect measure, full costs would 
include compliance and efficiency costs. The tax burden estimates presented here do not 
weigh the value of the government services provided with tax revenue. This is the norm in 
such studies. 
Each year, state and local governments and federal agencies publish more complete data on 
public finances. Each year, the Tax Foundation updates any historical revised data. For this 
reason, the entire historical series of state-local burden estimates is revised each year using 
the most recent data available.
The time frame for the estimates is the standard state fiscal year, and collection figures for 
those few states that do not operate on the standard July 1 to June 30 fiscal year have been 
adjusted accordingly to correspond to that time frame.2
Below is a full list of data sources, in order of importance:
Bureau of Economic Analysis
 
· National Income and Product Accounts Tables3
 
·
Regional Economic Accounts4
 
·
Satellite Industry Accounts Data5
 
·
Annual Industry Accounts6
2 
Only four states do not have a standard fiscal year. The Alabama and New York fiscal year ends September 30, the New York 
fiscal year ends March 31, and the Texas fiscal year ends August 31. See National Conference of State Legislatures, “State Fiscal 
Years,” Quick Reference Fiscal Table, http://www.ncsl.org/research/fiscal-policy/basic-information-about-which-states-have-major-
ta.aspx#fyrs.
3 
Bureau of Economic Analysis, National Income and Product Accounts Tables, http://www.bea.gov/iTable/iTable.
cfm?ReqID=9&step=1#reqid=9&step=1&isuri=1. 
4 
Bureau of Economic Analysis, Regional Economic Accounts, http://www.bea.gov/iTable/iTable.
cfm?ReqID=70&step=1#reqid=70&step=1&isuri=1 (includes Gross Domestic Product by State, Quarterly State Personal Income, and 
Annual State Personal Income). 
5 
Bureau of Economic Analysis, Satellite Industry Accounts Data, http://www.bea.gov/industry/tourism_data.htm (includes Tourism 
Satellite Accounts and Transportation Satellite Accounts). 
6 
Bureau of Economic Analysis, Industry Economic Accounts, http://www.bea.gov/industry/ (includes Gross Domestic Product by 
Industry and Benchmark Input-Output Accounts). 
3
Census Bureau
 
·
State Government Finances7
 
·
State Government Tax Collections8
 
·
State & Local Government Finance9
 
· Quarterly Summary of State & Local Taxes10
 
·
American Community Survey11
 
·
Population Estimates (data downloaded via Bureau of Economic Analysis)12
 
· Housing13
 
·
Commodity Flow Survey14
 
·
Economic Census15
 
·
Current Population Survey16 (joint project with Bureau of Labor Statistics)
 
·
Statistical Abstract of the United States17
 
·
Economic Indicators18
 
·
Commuting (Journey to Work)19
Urban Institute-Brookings Institution Tax Policy Center
 
·
State and Local Finance Data Query System20
The Nelson A. Rockefeller Institute of Government
 
·
State Revenue Reports21
Council on State Taxation
 
·
Total state and local business taxes22
7 
Census Bureau, State Government Finances, http://www.census.gov/govs/state/. 
8 
Census Bureau, State Government Tax Collections, http://www.census.gov/govs/statetax/. 
9 
Census Bureau, State & Local Government Finance, https://www.census.gov/govs/local/. 
10 
Census Bureau, Quarterly Summary of State & Local Taxes, http://www.census.gov/govs/qtax/. 
11 
Census Bureau, American Community Survey, http://www.census.gov/acs/. 
12 
See note 3. 
13 
Census Bureau, Housing, http://www.census.gov/housing/. 
14 
Census Bureau, Commodity Flow Survey, http://www.census.gov/econ/cfs/. 
15 
Census Bureau, Economic Census via American FactFinder, http://factfinder2.census.gov/faces/nav/jsf/pages/searchresults.
xhtml?refresh=t. See also U.S. Census Bureau, 2007 Economic Census, http://www.census.gov/econ/census07/index.html. 
16 
Census Bureau & Bureau of Labor Statistics, Current Population Survey (CPS), http://www.census.gov/cps/.
17 
Census Bureau, The 2012 Statistical Abstract, http://www.census.gov/compendia/statab/ (earlier editions can be found at http://
www.census.gov/compendia/statab/past_years.html). 
18 
Census Bureau, Economic Indicators, http://www.census.gov/cgi-bin/briefroom/BriefRm. 
19 
Census Bureau, Commuting (Journey to Work), http://www.census.gov/hhes/commuting/data/. 
20 
Urban Institute-Brookings Institution Tax Policy Center, State & Local Finance Data Query System (SLF-DQS), http://slfdqs.
taxpolicycenter.org/. 
21 
The Nelson A. Rockefeller Institute of Government, State Revenue Reports, http://www.rockinst.org/government_finance/state_
revenue_reports.aspx. 
22 
Council on State Taxation, Total state and local business taxes, State-by-state estimates for fiscal year 2012, http://www.cost.org/
WorkArea/DownloadAsset.aspx?id=84767 (old editions can be found at http://www.cost.org/search.aspx?searchtext=state%20
and%20local%20business%20tax%20study).
4
Internal Revenue Service
 
·
Statistics of Income23
Energy Information Administration
 
·
State Energy Data System24
U.S. Travel Association
 
·
The Impact of Travel on State Economies (payment required)25
Bureau of Transportation Statistics
 
·
American Travel Survey (ATS) 199526
Centers for Disease Control and Prevention
 
·
Behavioral Risk and Factor Surveillance System27
Beer Institute
 
·
Brewers Almanac28
Orzechowski and Walker
 
·
The Tax Burden on Tobacco (2011)29
State Departments of Revenue (or equivalent)
 
· Data on resident versus non-resident income tax filers
Commerce Clearing House
 
·
State Personal Income Tax Reciprocal Agreements via State Tax Smart Charts
23 
Internal Revenue Service, SOI [Statistics of Income] Tax Stats – Historic Table 2, http://www.irs.gov/uac/
SOI-Tax-Stats---Historic-Table-2.
24 
Energy Information Administration, State Energy Data System (SEDS), http://www.eia.gov/state/seds/ (includes both production 
and consumption data).
25 
U.S. Travel Association, The Impact of Travel on State Economies 2013, 2013 Research Report, https://www.ustravel.org/research/
economic-research/publications (payment required; past editions also used).
26 
Bureau of Transportation Statistics, American Travel Survey (ATS) 1995, http://www.transtats.bts.gov/Tables.
asp?DB_ID=505&DB_Name=American+Travel+Survey+(ATS)+1995&DB_Short_Name=ATS. 
27 
Centers for Disease Control and Prevention, Behavioral Risk Factor Surveillance System via WEAT: Web Enabled Analysis Tool, http://
apps.nccd.cdc.gov/s_broker/WEATSQL.exe/weat/freq_Year.hsql. 
28 
Beer Institute, Brewers Almanac 2013, http://www.beerinstitute.org/assets/uploads/Brewers_Almanac-_20131.xlsx (older 
editions also used). 
29 
Orzechowski and Walker, The Tax Burden on Tobacco, Historical Compilation, Vol. 46 (2011), http://www.taxadmin.org/fta/
tobacco/papers/Tax_Burden_2011.pdf (older editions also used). 
5
Congressional Budget Office
 
·
The Budget and Economic Outlook30
 
· Historical Budget Data31
 
·
Budget Projections32
 
·
Individual Income Tax Receipts and the Individual Tax Base33
Section B.
Tax Definition, Incidence Assumptions, and Allocation Methods in State-Local 
Tax Burden Rankings
In this report, state-local tax burden begins with the Census Bureau’s definition of a tax and 
then adds special assessments. This includes license taxes such as occupational and business 
license taxes and motor vehicle license taxes. Non-tax revenue items are not included in 
this paper’s estimates, such as lotteries and liquor store revenues. For a full list of what is 
included, in addition to the Census code for each tax, see Table 1 below. 34
Table 1.
Taxes Included in State-Local Tax Burden Rankings
 Tax Subcomponent
Census Code34
Property Taxes
T01
General Sales Taxes
T09
Alcoholic Beverages Sales Taxes
T10
Amusements Sales Taxes
T11
Insurance Premiums Sales Taxes
T12
Motor Fuels Sales Taxes
T13
Pari-mutuels Sales Taxes
T14
Public Utilities Sales Taxes
T15
Tobacco Products Sales Taxes
T16
Other Selective Sales Taxes
T19
Alcoholic Beverages License Taxes
T20
Amusements License Taxes
T21
Corporations License Taxes
T22
Hunting and Fishing License Taxes
T23
Motor Vehicles License Taxes
T24
Motor Vehicle Operators License Taxes
T25
Public Utilities License Taxes
T27
Occupation and Businesses Licenses Taxes NEC (Not Elsewhere 
Classified)
T28
Other License Taxes
T29
Individual Income Taxes
T40
Corporation Net Income Taxes
(henceforth Corporate Income Taxes)
T41
Death and Gift Taxes
T50
Documentary and Stock Transfer Taxes
T51
Severance Taxes
T53
Other Taxes NEC 
T99
Special Assessments for Property Improvements
U01
30 
Congressional Budget Office, The Budget and Economic Outlook: Fiscal Years 2013 to 2023, http://www.cbo.gov/sites/default/
files/cbofiles/attachments/43907-BudgetOutlook.pdf (new edition is used in addition to data from older versions). 
31 
Congressional Budget Office, Historical Budget Data—February 2013, http://www.cbo.gov/publication/43904. 
32 
Congressional Budget Office, Budget Projections—February 2013 Baseline Projections, http://www.cbo.gov/publication/43905. 
33 
Congressional Budget Office, Individual Income Tax Receipts and the Individual Tax Base—February 2013 Baseline, http://www.cbo.
gov/publication/43901. 
34 
Census Bureau, Description of Tax Categories, in Federal, State, and local GovernmentS: Government Finance and employment 
claSSiFication manual, http://www.census.gov/govs/www/class_ch7_tax.html.
6
The time frame for the estimates is the standard state fiscal year of July 1 through June 
30. Data from the few states that use a different fiscal calendar have been adjusted to the 
standard state fiscal year. 
When moving beyond the legal incidence of a tax, assumptions must be made using both 
economic theory and empirical economic literature to determine what parties bear the 
economic burden of a tax and by how much. These assumptions allow us to allocate the total 
tax burden to the respective subgroups. For our purposes, subgroup refers to the state of 
residence.
For most taxes, we assume that the tax is fully shifted forward to final product consumers, 
even those paid by businesses. Of course, this is not a perfect measure of the true incidence 
share. Whether it is borne by factors of production or consumers will vary by the type of 
product being sold and that product’s elasticity of demand. 
With regard to corporate income taxes, property taxes on business property (non-
residential), and insurance taxes paid by businesses, we assume that the taxes are borne 
by all owners of capital nationwide and all workers nationwide, using an equal split. This is 
based on the assumption that taxes on business are borne equally by capital and labor. Share 
of capital income in each state is defined as each state’s share of the national total of capital 
gains realizations plus dividends plus interest income. The remaining 50 percent (wage-
earners nationwide) is allocated to U.S. residents based upon their share of the nation’s wage 
and salary income.
We allocate all consumption taxes to residents based on disposable income rather than 
personal income.35 Some subcomponents of income are allocated in this manner, as well. 
Table 2 in Section C further explains our calculations for personal income.
In general, the model functions in the following manner. First, total state collections as 
indicated by the Census Government Finance Division36 are divided into subgroups, if 
necessary. Then incidence assumptions are made based on economic theory and empirical 
literature. Finally, the initial Census collections amount for the state is allocated to states 
across the nation based on the incidence assumptions. In some cases, the tax may be 
assumed to be borne by residents of the collecting state.
The following section describes the data sources, incidence assumptions, and methods of 
allocation for each of the taxes and license taxes listed in Table 1.
35 
Disposable personal income is calculated as personal income less federal income taxes paid, state and local income taxes paid, 
and all other personal income taxes paid. Any reference to “disposable personal income” in this report uses this definition. 
36 
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/). 
7
Property Taxes
Property tax collections, as reported by the Census Bureau, are split first into property taxes 
on business property and property taxes on non-business property. This split is made using 
estimates provided by the annual publication by the Council on State Taxation (COST), Total 
State and Local Business Taxes,37 which estimates the total property taxes paid by businesses 
each year by state. The remainder is then assumed to be paid by non-business entities. 
The business portion is then further split into two categories: property taxes on real estate 
and property taxes on non-real estate using the BEA Regional Economic Accounts data on 
Gross Domestic Product (GDP) by State.38 
 
·
The real estate portion is further split into property taxes on residential real 
estate (rental units) and property taxes on non-residential real estate (commercial 
leasing) using rental property business data from the Economic Census.39 The 
residential portion is assumed to be borne by residents of the collecting state and 
thus allocated fully to the collecting state. The non-residential portion is assumed 
to be borne equally between capital and labor nationwide. It is allocated to states 
based on the share of capital income and net earnings, split evenly.40 Data on 
capital gains is from the IRS Statistics of Income,41 while data on dividends and 
interest income and net earnings are from BEA Regional Economic Accounts.42 
 
·
The non-real estate portion is assumed to be borne equally between capital and 
labor nationwide and is again allocated to states based on share of capital income, 
50 percent, and net earnings, remaining 50 percent.43
 
The non-business portion of property taxes is divided into three categories: taxes on 
personal property, taxes on owner-occupied housing, and taxes on seasonal homes. 
 
·
The amount that is devoted to personal property is taken from BEA Regional 
Economic Accounts, namely the state and local personal property tax from Annual 
State Personal Income,44 It is assumed to be borne by residents of the collecting 
state.
37 
Council on State Taxation, Total state and local business taxes, State-by-state estimates for fiscal year 2012, http://www.cost.org/
WorkArea/DownloadAsset.aspx?id=84767 (old editions can be found at http://www.cost.org/search.aspx?searchtext=state%20
and%20local%20business%20tax%20study).
38 
Bureau of Economic Analysis, Regional Economic Accounts, http://www.bea.gov/iTable/iTable.
cfm?ReqID=70&step=1#reqid=70&step=1&isuri=1 (includes Gross Domestic Product by State, Quarterly State Personal Income, and 
Annual State Personal Income).
39 
Census Bureau, Economic Census via American FactFinder, http://factfinder2.census.gov/faces/nav/jsf/pages/searchresults.
xhtml?refresh=t. See also Census Bureau, 2007 Economic Census, http://www.census.gov/econ/census07/index.html. 
40 
Capital income equals capital gains realizations plus dividends plus interest income.
41 
Internal Revenue Service, SOI [Statistics of Income] Tax Stats – Historic Table 2, http://www.irs.gov/uac/
SOI-Tax-Stats---Historic-Table-2.
42 
 Bureau of Economic Analysis, Regional Economic Accounts, http://www.bea.gov/iTable/iTable.
cfm?ReqID=70&step=1#reqid=70&step=1&isuri=1 (includes Gross Domestic Product by State, Quarterly State Personal Income, and 
Annual State Personal Income).
43 
See notes 40 and 41 for data sources. 
44 
Bureau of Economic Analysis, Regional Economic Accounts, http://www.bea.gov/iTable/iTable.
cfm?ReqID=70&step=1#reqid=70&step=1&isuri=1 (includes Gross Domestic Product by State, Quarterly State Personal Income, and 
Annual State Personal Income).
8
 
·
The residual is then assumed to be borne by owner-occupied housing and 
seasonal homes with the relative share going to owner-occupied housing versus 
seasonal homes determined by the proportion of the total number of housing 
units in a state that are owner-occupied housing versus the proportion that are 
seasonal homes, as estimated by the Census Bureau.45 The owner-occupied 
portion is assumed to be borne by residents of the collecting state, while the 
seasonal homes portion is allocated to states using 1995 American Travel 
Survey46 data on owned vacation homes by state with the figures adjusted 
using population growth and estimates of ownership by non-tourists using data 
obtained from American Community Survey.47 
 
General and Other Selective Sales Taxes48
Sales tax collections are first divided into three groups: sales taxes on business inputs, sales 
taxes paid by tourists, and sales taxes paid by non-tourists on personal consumption. 
Sales taxes on business inputs is estimated using COST’s business tax study statistics on 
the general sales tax.49 The portion paid by business is assumed to be passed forward to 
consumers on the basis of their estimated consumption from each industry category.50 This 
is done using BEA Regional Economic Accounts data51 to estimate that fraction of sales taxes 
on business inputs that is paid by each industry. Then depending upon the industry, the tax 
is assumed to be either borne fully by residents of the collecting state, or allocated using 
some other method, with some portion going to out-of-state consumers. 
For example, sales taxes paid by manufacturing firms within a state are allocated on the basis 
of a state’s share of national disposable personal income under the assumption that taxes on 
manufacturing are borne by nationwide consumers.52 Sales taxes paid by the mining industry 
are allocated similarly to severance taxes, whose incidence assumptions for severance taxes 
and method of allocation are discussed later in this paper. Sales taxes paid by the retail and 
wholesale trade are assumed to be borne by consumers purchasing products within that 
state, most of which are own-state residents. The remaining portions are tourists or non-
tourist out of state travelers, such as daily commuters who travel from state A to state B for 
work. Ultimately, however, all sales taxes paid by business are assumed to be borne by end-
use personal consumers in the form of higher prices.
45 
Census Bureau, Housing, http://www.census.gov/housing/.
46 
Bureau of Transportation Statistics, American Travel Survey (ATS) 1995, http://www.transtats.bts.gov/Tables.
asp?DB_ID=505&DB_Name=American+Travel+Survey+(ATS)+1995&DB_Short_Name=ATS.
47 
Census Bureau, American Community Survey, http://www.census.gov/acs/.
48 
Census codes T09 and T19, respectively.
49 
Council on State Taxation, Total state and local business taxes, State-by-state estimates for fiscal year 2012, http://www.cost.org/
WorkArea/DownloadAsset.aspx?id=84767 (old editions can be found at http://www.cost.org/search.aspx?searchtext=state%20
and%20local%20business%20tax%20study).
50 
Industries categories, as designated by BEA, include: all industry total; agriculture, forestry, fishing, and hunting; mining; utilities; 
construction; manufacturing; wholesale trade; retail trade; transportation and warehousing, excluding Postal Service; information; 
finance and insurance; insurance carriers and related activities; real estate and rental and leasing; professional and technical 
services; management of companies and enterprises; administrative and waste services; educational services; health care and 
social assistance; arts, entertainment, and recreation; accommodation; food service and drinking places; and other services, 
except government.
51 
Bureau of Economic Analysis, Regional Economic Accounts, http://www.bea.gov/iTable/iTable.
cfm?ReqID=70&step=1#reqid=70&step=1&isuri=1 (includes Gross Domestic Product by State, Quarterly State Personal Income, and 
Annual State Personal Income).
52 
See note 35 for definition of disposable personal income.
9
For those sales taxes that are borne by tourists, the total tax collected is broken down into 
four subcategories: food services, retail trade, accommodation, and other tourist purchases. 
The estimated split between these four categories is made using sales tax rates for general 
sales and meals, in addition to domestic travel expenditures data provided by the U.S. Travel 
Association (USTA) annual publication The Impact of Travel on State Economies.53 
Adjustments are made to account for business travelers, whose travel consumption taxes are 
assumed to be borne by consumers nationwide and are allocated to states based on share 
of disposable personal income.54 Sales taxes paid by foreign tourists are estimated using 
a combination of the BEA Satellite Industry Accounts Data55 and state-by-state data from 
USTA.56 Business tourist expenditures portion is not included in this category, but this is part 
of COST’s business tax study estimate. It is assumed to be borne by consumers nationwide 
and is allocated to states based on share of disposable personal income.57 
In terms of incidence and allocation of sales taxes paid by tourists, the following assumptions 
are made:
 
·
For the food services category as defined by the USTA study, each state’s meals 
tax rate is applied to those expenditures as opposed to the general sales tax rate, 
thus giving us the sales taxes paid by tourists on food services.58 
 
·
For lodging, state-by-state data on accommodations sector GDP is used to 
approximate the amount of general sales taxes that were paid for lodging, all of 
which is assumed to be borne by tourists.59 
 
·
Tourist expenditures on food, retail sales, and lodging are allocated to states on 
the basis of the number of person trip days that one state’s residents spent as 
“tourists” in that given state. The source of this data was the 1995 American 
Travel Survey, and this data is then extrapolated using travel industry growth data 
and population growth.60
 
The fraction of total local sales taxes, general and selective, that is paid by tourists is 
assumed to follow the same breakdown as state-level sales taxes.
53 
U.S. Travel Association, The Impact of Travel on State Economies 2013, 2013 Research Report, https://www.ustravel.org/research/
economic-research/publications (payment required; past editions also used).
54 
See note 35 for definition of disposable personal income.
55 
Bureau of Economic Analysis, Satellite Industry Accounts Data, http://www.bea.gov/industry/tourism_data.htm (includes Tourism 
Satellite Accounts and Transportation Satellite Accounts).
56 
U.S. Travel Association, The Impact of Travel on State Economies 2013, 2013 Research Report, https://www.ustravel.org/research/
economic-research/publications (payment required; past editions also used).
57 
See note 35 for definition of disposable personal income.
58 
U.S. Travel Association, The Impact of Travel on State Economies 2013, 2013 Research Report, https://www.ustravel.org/research/
economic-research/publications (payment required; past editions also used).
59 
Bureau of Economic Analysis, Regional Economic Accounts, http://www.bea.gov/iTable/iTable.
cfm?ReqID=70&step=1#reqid=70&step=1&isuri=1 (includes Gross Domestic Product by State, Quarterly State Personal Income, and 
Annual State Personal Income).
60 
Bureau of Transportation Statistics, American Travel Survey (ATS) 1995, http://www.transtats.bts.gov/Tables.
asp?DB_ID=505&DB_Name=American+Travel+Survey+(ATS)+1995&DB_Short_Name=ATS.
10 Sales taxes paid by non-tourist personal consumers is assumed to be the residual of the 
above two categories. This is allocated to states based partially upon state of residence 
(that is, borne by residents of the collecting state) and partially upon place of work. It is 
split evenly for general sales tax and 30 percent to the state of resident and 70 percent for 
place of work for food services. Data on place of work comes from BEA Regional Economic 
Accounts61 and Census Commuting (Journey to Work)62 data.
Alcoholic Beverages Sales Taxes
This portion of the model attempts to account for smuggling across state lines by assuming 
that a state is either solely an importer or solely an exporter of alcoholic beverages. This 
assumption is determined by comparing state sales data with state consumption data. If 
a state’s sales exceeds its consumption, it is deemed an exporter. If a state’s consumption 
exceeds its sales, it is deemed an importer.
State-by-state sales data on alcohol shipments is taken from the Beer Institute’s annual 
publication, the Brewers Almanac.63 Consumption data for each state is taken from the 
Centers for Disease Control and Prevention’s (CDC) Behavioral Risk Factor Surveillance 
System. This includes alcohol consumption by state.64 
If the state is deemed an exporter, total sales is multiplied by one minus the ratio of 
consumption sales. The result is used as the collections associated with that state. The 
collections from all states that are deemed exporter states are aggregated into a pool of 
national exported taxes. It is then allocated to consumers nationwide based on share of 
disposable personal income and based also upon estimated importation of alcohol by state. If 
a state is deemed an importer, taxes are assumed to be borne by residents of the collecting 
state. 
Amusements and Pari-Mutuels Sales Taxes65
Each state’s collections are divided into two categories: tax collections from tourists and tax 
collections from non-tourists. 
 
·
The tourist portion is estimated using recreation expenditure data from the 
USTA Impact of Travel on State Economies.66 The tourist portion is assumed to all 
be personal and not business-related. This tourist portion is allocated to states 
using data from the 1995 American Travel Survey, which was extrapolated using 
population growth.67
61 
Bureau of Economic Analysis, Regional Economic Accounts, http://www.bea.gov/iTable/iTable.
cfm?ReqID=70&step=1#reqid=70&step=1&isuri=1 (includes Gross Domestic Product by State, Quarterly State Personal Income, and 
Annual State Personal Income).
62 
Census Bureau, Commuting (Journey to Work), http://www.census.gov/hhes/commuting/data/.
63 
Beer Institute, Brewers Almanac 2013, http://www.beerinstitute.org/assets/uploads/Brewers_Almanac-_20131.xlsx (older 
editions also used).
64 
Centers for Disease Control and Prevention, Behavioral Risk Factor Surveillance System via WEAT: Web Enabled Analysis Tool, http://
apps.nccd.cdc.gov/s_broker/WEATSQL.exe/weat/freq_Year.hsql.
65 
Census codes T11 and T14, respectively.
66 
U.S. Travel Association, The Impact of Travel on State Economies 2013, 2013 Research Report, https://www.ustravel.org/research/
economic-research/publications (payment required; past editions also used).
67 
Bureau of Transportation Statistics, American Travel Survey (ATS) 1995, http://www.transtats.bts.gov/Tables.
asp?DB_ID=505&DB_Name=American+Travel+Survey+(ATS)+1995&DB_Short_Name=ATS.
11
 
·
The non-tourist portion is assumed to be remainder and is allocated via state of 
residence and wages by place of work, using a 30 percent and 70 percent split, 
where the data is from BEA Regional Economic Accounts68 and Census Commuting 
(Journey to Work)69.
 
Insurance Premiums Sales Taxes
Collections are divided into three categories using GDP by state from BEA Regional 
Economic Accounts.70 These categories are insurance taxes for real estate (housing), 
insurance taxes paid by businesses, and non-housing or non-business insurance taxes 
(automobiles, for example).
 
·
Taxes levied on housing are assumed to be borne by the homeowner and are 
allocated fully to the collecting state.
 
·
Those levied on businesses are assumed to be borne by owners of capital 
nationwide and allocated to states based on share of capital income (capital gains 
realizations plus dividends plus interest income). Data on capital gains is from the 
IRS Statistics of Income,71 while data on dividends and interest income and net 
earnings are from BEA Regional Economic Accounts.72 
 
·
The remainder, such as those taxes that are paid for other personal insurance, 
such as automobile insurance, are assumed to be borne by the consumer within 
the state itself and not nationwide. They are allocated fully to the collecting state.
 
Motor Fuels Sales Taxes
Motor fuel sales taxes, as classified by the Census Bureau, include the taxes imposed on 
three main motor fuels: aviation fuel, diesel fuel, and gasoline. 
 
·
Taxes paid on aviation fuel are assumed to be borne by travelers to the United 
States worldwide, with a double weight applied to U.S. travelers relative to foreign 
travelers. These are allocated in the same manner as the Federal Air Transport Tax.
 
·
Taxes paid for diesel fuel are assumed to be borne by consumers nationwide and 
allocated to states based on their share of disposable personal income.73
68 
Bureau of Economic Analysis, Regional Economic Accounts, http://www.bea.gov/iTable/iTable.
cfm?ReqID=70&step=1#reqid=70&step=1&isuri=1 (includes Gross Domestic Product by State, Quarterly State Personal Income, and 
Annual State Personal Income).
69 
Census Bureau, Commuting (Journey to Work), http://www.census.gov/hhes/commuting/data/.
70 
Bureau of Economic Analysis, Regional Economic Accounts, http://www.bea.gov/iTable/iTable.
cfm?ReqID=70&step=1#reqid=70&step=1&isuri=1 (includes Gross Domestic Product by State, Quarterly State Personal Income, and 
Annual State Personal Income).
71 
Internal Revenue Service, SOI [Statistics of Income] Tax Stats – Historic Table 2, http://www.irs.gov/uac/
SOI-Tax-Stats---Historic-Table-2.
72 
Bureau of Economic Analysis, Regional Economic Accounts, http://www.bea.gov/iTable/iTable.
cfm?ReqID=70&step=1#reqid=70&step=1&isuri=1 (includes Gross Domestic Product by State, Quarterly State Personal Income, and 
Annual State Personal Income).
73 
See note 35 for definition of disposable personal income.
12
 
· Motor fuel taxes are divided into two groups: those borne by domestic residents 
and those borne by tourists driving in the state. The amount of fuel consumed 
by tourists in a state is estimated using data from the USTA74 and is allocated 
to states using data from the American Travel Survey75 which was extrapolated 
using population growth. The non-tourist portion (the remainder) is allocated to 
residents of the collecting state (80 percent) and a small fraction on the basis of 
wages by place of work (20 percent). This data is from BEA Regional Economic 
Accounts76 and Census Commuting (Journey to Work).77 Note that for most states, a 
large fraction of “tourists” are actually in-state residents driving long-trips. 
 
Public Utilities Sales Taxes
Public utility taxes are assumed to be borne by the consumers of final products, whether 
directly through personal energy consumption or indirectly through the consumption of 
other products whose producer paid public utility taxes. 
First, public utility tax collections are split into electricity taxes, telephone taxes, water taxes, 
and television taxes. The largest and primary category are public utility taxes on electricity.
Public utility taxes on electricity are allocated initially to states based upon electricity 
consumption by state and sector from the Energy Information Agency (EIA).78 Then, these 
taxes are further divided within states into five sector-specific categories based on end use: 
electricity used in the transportation sector, the industrial sector, the residential sector, the 
commercial sector, and electricity exported to other states. This is done using EIA data, as 
well.
 
·
Taxes on the transportation sector are assumed to be borne by the entire nation 
and allocated to states based on their share of disposable personal income.79
 
·
Industrial sector taxes are borne by the entire nation and allocated in relation to 
disposable personal income.80
 
·
Residential electricity taxes are assumed to be fully borne by residents of the 
collecting state.
 
·
Commercial sector electricity taxes are allocated in the same manner as retail 
sales taxes.
 
·
Adjustments are made for the importing and exporting of electricity across state 
lines. States importing taxed electricity’s collections are allocated from nationwide 
pool of exporting state collections. 
74 
U.S. Travel Association, The Impact of Travel on State Economies 2013, 2013 Research Report, https://www.ustravel.org/research/
economic-research/publications (payment required; past editions also used).
75 
Bureau of Transportation Statistics, American Travel Survey (ATS) 1995, http://www.transtats.bts.gov/Tables.
asp?DB_ID=505&DB_Name=American+Travel+Survey+(ATS)+1995&DB_Short_Name=ATS.
76 
Bureau of Economic Analysis, Regional Economic Accounts, http://www.bea.gov/iTable/iTable.
cfm?ReqID=70&step=1#reqid=70&step=1&isuri=1 (includes Gross Domestic Product by State, Quarterly State Personal Income, and 
Annual State Personal Income).
77 
Census Bureau, Commuting (Journey to Work), http://www.census.gov/hhes/commuting/data/.
78 
Energy Information Administration, State Energy Data System (SEDS), http://www.eia.gov/state/seds/ (includes both production 
and consumption data).
79 
See note 35 for definition of disposable personal income.
80 
Id. 
13 Note that adjustments are made for the exporting and importing of electricity between 
states using EIA data.81 
Public utility taxes on telephone are divided into two subgroups: taxes paid by businesses 
and taxes paid by non-business households. Taxes paid by businesses are assumed to 
be borne by consumers nationwide and are allocated to states based on their share of 
disposable personal income.82 Those taxes paid by households are assumed to be borne by 
residents of the collecting state. The same procedure is done for public utility taxes on water. 
Public utility taxes on television are assumed to be entirely from personal consumption and 
are thus assumed to be borne by residents of the collecting state.
Tobacco Products Sales Taxes
This portion of the model, similar to the portion addressing Alcoholic Beverages Sales Taxes, 
attempts to account for smuggling across state lines by assuming that a state is either solely 
an importer or solely an exporter of alcoholic beverages. This assumption is determined 
by comparing state sales data with state consumption data. If a state’s sales exceeds its 
consumption, it is deemed an exporter. If a state’s consumption exceeds its sales, it is 
deemed an importer.
State-by-state sales data is taken from the Orzechowski and Walker paper entitled The 
Tax Burden on Tobacco.83 The allocation uses this data series as well. Consumption data for 
each state, by place of resident consumption, is taken from the CDC Behavioral Risk Factor 
Surveillance System.84 
If the state is deemed an exporter, total sales is multiplied by one minus the ratio of 
consumption sales. It is used as the collections associated with that state. Then, the 
collections from all states that are deemed exporter states are aggregated into a pool of 
national exported taxes. Finally, it is allocated to consumers nationwide based on share of 
disposable personal income and based upon estimated importation of cigarettes by state. If 
a state is deemed an importer, taxes are assumed to be borne by residents of the collecting 
state. 
Alcoholic Beverages License Taxes
Total state collections are allocated based on same distribution as Alcoholic Beverages Sales 
Taxes.
81 
Energy Information Administration, State Energy Data System (SEDS), http://www.eia.gov/state/seds/ (includes both production 
and consumption data).
82 
See note 35 for definition of disposable personal income.
83 
Orzechowski and Walker, The Tax Burden on Tobacco, Historical Compilation, Vol. 46 (2011), http://www.taxadmin.org/fta/
tobacco/papers/Tax_Burden_2011.pdf (older editions also used).
84 
Centers for Disease Control and Prevention, Behavioral Risk Factor Surveillance System via WEAT: Web Enabled Analysis Tool, http://
apps.nccd.cdc.gov/s_broker/WEATSQL.exe/weat/freq_Year.hsql.
14 Amusements License Taxes
Total state collections are allocated based on same distribution as Amusements and Pari-
Mutuels Taxes. 
Corporations License Taxes
Total state collections are allocated based on same distribution as Corporate Income Taxes, 
which is discussed in subsequent section.
Hunting and Fishing License Taxes and Other License Taxes85
Total state collections are first divided into two categories: personal license taxes and 
business license taxes. The amount estimated to be personal is equal to the minimum of 
BEA’s “Other Personal Taxes” category from the Annual State Personal Income data (Regional 
Economic Accounts),86 or the “Hunting and Fishing Licenses” plus “Other Licenses” from 
Census’s Government Finances Division.87 The business amount is assumed to be the 
remainder. The personal portion is assumed to be borne by residents of the collections state. 
The business portion is assumed to be borne by consumers nationwide and allocated to 
states using share of disposable personal income.88
Motor Vehicles License Taxes and Motor Vehicle Operators License Taxes89
Total state collections are initially divided into two categories: personal license taxes and 
business license taxes. The personal amount equals the BEA Regional Economic Accounts 
estimate of motor vehicle licenses from Annual State Personal Income data.90 The business 
amount is assumed to be the remainder. The personal portion is assumed to be borne of 
residents of the collecting state. The business portion is assumed to be borne by consumers 
nationwide and is allocated to states based on their share of disposable personal income.91
Public Utilities License Taxes
Total state collections are allocated based on same distribution as Public Utilities Sales Taxes. 
Occupation and Business License Taxes NEC (Not Elsewhere Classified)
85 
Census codes T23 and T29, respectively.
86 
Bureau of Economic Analysis, Regional Economic Accounts, http://www.bea.gov/iTable/iTable.
cfm?ReqID=70&step=1#reqid=70&step=1&isuri=1 (includes Gross Domestic Product by State, Quarterly State Personal Income, and 
Annual State Personal Income).
87 
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/).
88 
See note 35 for definition of disposable personal income.
89 
Census codes T24 and T25, respectively. 
90 
Bureau of Economic Analysis, Regional Economic Accounts, http://www.bea.gov/iTable/iTable.
cfm?ReqID=70&step=1#reqid=70&step=1&isuri=1 (includes Gross Domestic Product by State, Quarterly State Personal Income, and 
Annual State Personal Income).
91 
See note 35 for definition of disposable personal income.
15 Total state collections are allocated to states based on share of gross earnings (from BEA 
Regional Economic Accounts) and includes adjustment for commuters.
Individual Income Taxes
In all states besides the nine that do not tax ordinary income, income derived from earnings 
raises the bulk of the income tax revenue. One consequence of this is that the income tax 
can legally be imposed on non-residents who work in a state, yet live in another state. Some 
states have reciprocal agreements with other states. These prohibit one state from taxing 
one state’s non-resident worker’s wages. 
Total state collections are divided into two categories: income taxes paid by residents and 
income taxes paid by nonresidents. The portion that is paid by nonresidents is allocated 
based on each state’s Department of Revenue data, if available. If this data is unavailable, the 
amount paid by nonresidents is estimated using Census Commuting (Journey to Work) data.92 
Income taxes paid by residents are borne fully by the collecting state.
Adjustments are made for reciprocity agreements between states,93 proprietor income using 
BEA Regional Economic Accounts data94, and residents of other countries. The share of 
local income taxes borne by residents versus nonresidents is assumed to follow the same 
breakdown as state-level income taxes.
Corporate Income Taxes
In this study, we assume that corporate income taxes are borne equally by capital and labor. 
In other words, we assume that 50 percent of each state’s corporate income tax collections 
are paid by U.S. residents based upon their share of capital income.95 Data on capital gains 
is from the IRS Statistics of Income,96 while data on dividends and interest income are from 
BEA Regional Economic Accounts.97 The remaining 50 percent is allocated to U.S. residents 
based upon their share of the nation’s wage and salary income using data from BEA Regional 
Economic Accounts.98 
92 
Census Bureau, Commuting (Journey to Work), http://www.census.gov/hhes/commuting/data/.
93 
As reported by Commerce Clearing House.
94 
Bureau of Economic Analysis, Regional Economic Accounts, http://www.bea.gov/iTable/iTable.
cfm?ReqID=70&step=1#reqid=70&step=1&isuri=1 (includes Gross Domestic Product by State, Quarterly State Personal Income, and 
Annual State Personal Income).
95 
Capital income equals capital gains realizations plus dividends plus interest income.
96 
Internal Revenue Service, SOI [Statistics of Income] Tax Stats – Historic Table 2, http://www.irs.gov/uac/
SOI-Tax-Stats---Historic-Table-2.
97 
Bureau of Economic Analysis, Regional Economic Accounts, http://www.bea.gov/iTable/iTable.
cfm?ReqID=70&step=1#reqid=70&step=1&isuri=1 (includes Gross Domestic Product by State, Quarterly State Personal Income, and 
Annual State Personal Income).
98 
Bureau of Economic Analysis, Regional Economic Accounts, http://www.bea.gov/iTable/iTable.
cfm?ReqID=70&step=1#reqid=70&step=1&isuri=1 (includes Gross Domestic Product by State, Quarterly State Personal Income, and 
Annual State Personal Income).
16 Death and Gift Taxes
State and local estate taxes are assumed to be borne fully be the deceased at the time of 
death, and thereby are assumed to be borne by residents of the same state that collects the 
estate tax revenue. Collections are allocated entirely to residents of the collecting state. The 
same applies for gift taxes.
Documentary and Stock Transfer Taxes
Total state collections allocated based on same distribution as Property Taxes, less personal 
property taxes.99 Please refer to Figure 1.
Severance Taxes
Severance tax collections are first divided into taxes on energy and taxes on non-energy, 
such as timber, using GDP by State data from BEA Regional Economic Accounts.100 Then 
using EIA101 data on production by state, the energy portion of severance taxes are divided 
into further into three categories based upon their share of energy production in a state: 
coal, natural gas, and crude oil. Then these three categories of imbedded severance taxes 
are initially allocated to states based on that state’s share of coal, natural gas, or crude oil 
consumption.
Each of these three consumption categories (coal, natural gas, or crude oil) in each state 
is divided further into five sectors: residential sector, electricity sector, commercial sector, 
industrial sector, and transportation sector.
 
·
Residential sector taxes are assumed to be borne by residents of the collecting 
state for all three consumption categories.
 
·
Electricity sector severance taxes follow the same distribution as electricity Public 
Utilities Sales Taxes in a state for all three consumption categories.
 
·
Severance taxes paid on energy use by the commercial sector are allocated in the 
same manner as the retail trade sales taxes for all three consumption categories.
 
·
Industrial sector taxes are assumed to be borne by consumers nationwide and are 
allocated to states based on share of disposable personal income102 for all three 
consumption categories.
99 
 Bureau of Economic Analysis, Regional Economic Accounts, http://www.bea.gov/iTable/iTable.
cfm?ReqID=70&step=1#reqid=70&step=1&isuri=1 (includes Gross Domestic Product by State, Quarterly State Personal Income, and 
Annual State Personal Income).
100 
 Id. 
101 
 Energy Information Administration, State Energy Data System (SEDS), http://www.eia.gov/state/seds/ (includes both production 
and consumption data).
102 
 See note 35 for definition of disposable personal income.
17
 
·
Transportation sector severance taxes in the coal and natural gas consumption 
categories are assumed to be borne by residents of the collection state. 
Transportation sector taxes in the crude oil consumption category are further 
divided into three categories: aviation fuel, motor gasoline, and other. Aviation 
fuel follows the same allocation as the Federal Air Transport Tax. Motor gasoline 
follows same allocation as Motor Fuels Sales Taxes. The final category, other, is 
assumed to be borne by consumers nationwide and is allocated to states based 
on share of disposable personal income.103
 
This method includes the possibility that another state’s residents bear the burden of 
severance taxes that are included in final products sold by businesses in the of commercial or 
industrial sector, as well as those embedded in transportation prices.
Non-energy severance taxes are assumed to be borne by consumers nationwide and are 
allocated to states based on share of disposable personal income.104
Other NEC (Not Elsewhere Classified) Taxes
Total state collections are allocated entirely to residents of collecting state.
Special Assessments
Total state collections are allocated based on same distribution of Property Taxes, less 
personal property taxes.105 
Section C.
Income Definition, Incidence Assumptions, and Allocation Methods in State-
Local Tax Burden Estimates
The definition of income used in this study is a hybrid between the BEA’s calculation of 
“personal income”106 and the income concept used by the Congressional Budget Office in its 
annual study of effective federal tax rates.107
103 
Id.
104 
Id.
105 Bureau of Economic Analysis, Regional Economic Accounts, http://www.bea.gov/iTable/iTable.
cfm?ReqID=70&step=1#reqid=70&step=1&isuri=1 (includes Gross Domestic Product by State, Quarterly State Personal Income, and 
Annual State Personal Income).
106 The Bureau of Economic Analysis defines personal income as “[t]he income that persons receive in return for their provision 
of labor, land, and capital used in current production, plus current transfer receipts less contributions for government social 
insurance (domestic). Personal income arising from current production consists of compensation of employees, proprietors’ 
income with inventory valuation adjustment and capital consumption adjustment (CCAdj), rental income of persons with CCAdj, 
and personal income receipts on assets (personal interest income and personal dividend income).” See Bureau of Economic 
Analysis, Glossary: National Income and Product Accounts, at 23, http://www.bea.gov/national/pdf/methodology/NIPA%20
Glossary%209-30-13.pdf. 
107 For the Congressional Budget Office’s definition of income, see Congressional Budget Office, Effective Federal Tax Rates, 1979-
1997 (Oct. 1, 2001), at 20, http://www.cbo.gov/sites/default/files/cbofiles/attachments/2001EffectiveTaxRate.pdf#page=44. 
See also Congressional Budget Office, Effective Federal Tax Rates, 1997 to 2000 (Aug. 29, 2003), at 4, http://www.cbo.gov/sites/
default/files/cbofiles/attachments/08-29-2003AverageTaxRates.pdf#page=14. 
18 The income measure used here adds to personal income the following: capital gains 
realizations, pension and life insurance distributions, corporate income taxes paid, and taxes 
on production and imports less subsidies. It subtracts from personal income the nonfungible 
portion of Medicare and Medicaid, initial contributions to pensions from employers, and 
imputed personal interest. See Table 3 at the end of this Appendix for detailed information 
on each subcomponent of income and the allocation method of attributing each national 
measure to the states. 
Note that some small fraction of income is still double-counted over a lifetime, most notably 
the contributions of individual employees to pension and life insurance funds. There is also 
a timing problem with respect to the corporate income taxes paid and the fact that capital 
gains realizations are used as opposed to retained earnings (accrued capital gains). Capital 
gains realizations are used for two reasons. The first is due to systematic movements across 
geographies over life cycles such as individuals moving to Arizona or Florida. The second 
is because we are only looking at state and local taxes where the corporate income tax is 
relatively minor.
To determine the amount of income within each state for a fiscal year, national quarterly 
totals for each income category were taken from BEA National Income and Product Accounts 
Tables (NIPA)108 and allocated to states using data from two sources: BEA Regional Economic 
Accounts109 and the IRS Statistics of Income Division.110 
Income amounts are on a July-June basis, and are thereby not equivalent to a calendar year. 
When possible, quarterly data from BEA Regional Economic Accounts111 was used to allocate 
income on the state fiscal year basis. When annual data was only available, the fiscal year 
total is assumed to be half calendar year one and half calendar year two.
The largest portion of income in our measure, personal income, was allocated perfectly 
since quarterly data is available at both the national level and regional level from BEA. For 
other variables such as capital gains, IRS data that is only available on a tax year (calendar 
year) basis was used and the fiscal year split, as noted above, was made. Such was the case 
with the state-by-state data used to subtract initially the full amount and then re-allocate 
the national total of Medicare and Medicaid benefits after the non-fungible portion was 
removed. The Current Population Survey (CPS)112 was the source of the fungibility fraction 
and it was assumed to be constant for all states, but differs between Medicaid, which is 
not very fungible, and Medicare, which is highly fungible. Due to the fact that the CPS 
historically underreports health insurance and program participation, upward adjustments 
were made to the CPS aggregate data to reflect the underreporting as measured by an 
Urban Institute study from 2007.113
108 Bureau of Economic Analysis, National Income and Product Accounts Tables, http://www.bea.gov/iTable/iTable.
cfm?ReqID=9&step=1#reqid=9&step=1&isuri=1. 
109 Bureau of Economic Analysis, Regional Economic Accounts, http://www.bea.gov/iTable/iTable.
cfm?ReqID=70&step=1#reqid=70&step=1&isuri=1 (includes Gross Domestic Product by State, Quarterly State Personal Income, and 
Annual State Personal Income).
110 
Internal Revenue Service, SOI [Statistics of Income] Tax Stats – Historic Table 2, http://www.irs.gov/uac/
SOI-Tax-Stats---Historic-Table-2.
111 
Id.
112 Census Bureau & Bureau of Labor Statistics, Current Population Survey (CPS), http://www.census.gov/cps/. 
113 The Urban Institute, Laura Wheaton, Underreporting of Means-Tested Transfer Programs in the CPS and SIPP (Jan. 1, 2007), http://
www.urban.org/UploadedPDF/411613_transfer_programs.pdf. 
19 Table 2.
Detailed Descriptions of Income Subcomponents, Incidence Assumptions, and Method 
of Allocation in State-Local Tax Burden Rankings
Income =
Incidence Assumption/Method of Allocation
1
Personal Income
National total from National Income and Product Accounts (NIPA) “Personal Income and Its 
Disposition” table, “Personal Income” series (Table 2.1, Line 1).114 
Allocated to states via “Personal Income” from Quarterly State Personal Income “Quarterly 
Income Summary” table (Table SQ4, Line 10).115
2
Plus
Capital Gains 
Realizations
National total from former NIPA Table 7.19 (BEA no longer produces this table as it used to be. 
Old data is used and then recent years are extrapolated using population growth.)
Allocated to states using “Net Capital Gain (Less Loss) in AGI” from Internal Revenue Service 
(IRS).116 Recent years extrapolated using growth of “Dividends, Interest, and Rent” from Annual 
State Personal Income “State Economic Profiles” table (Table SA30, Line 90).117
3
Plus
Pension and 
Life Insurance 
Benefits
National total from NIPA “Employer Contributions for Employee Pension and Insurance Funds 
by Industry and by Type” table (Table 6.11), Lines 38 (“Pension Plans”) and 42(“Group Life 
Insurance”).118
Allocated to states based using “Taxable Pensions and Annuity in AGI” from IRS.119 Recent years 
extrapolated using change in “Social Security Benefits” from Annual State Personal Income 
“Personal Current Transfer Receipts” table (SA35, Line 40).120
4
Plus
Corporate 
Income Taxes 
(Federal, State, 
Local)
National total from NIPA “Federal Government Current Receipts and Expenditures” table, “Taxes 
on Corporate Income” series (Table 3.2, Line 7).121
Allocated to states in the following manner: 50 percent based on state’s share of total capital 
income, which is defined as capital gains (“Net Capital Gain…in AGI” from IRS122) plus dividends 
(“Personal Dividend Income”, Annual State Personal Income Table SA30 “State Economic Profiles”, 
Line 91123) plus interest (“Personal Interest Income,” Annual State Personal Income Table SA30, 
Line 92124) and 50 percent based upon state’s share of total net earnings (“Net Earnings” from 
Annual State Personal Income Table SA30, Line 45125).
5
Plus
Federal Gas Tax
National total from NIPA “Taxes on Production and Imports” (TOPI) table, series on Federal 
Gasoline Excise Tax (Table 3.5, Line 4).126 
Allocated to states using “Motor Gasoline Consumed by the Transportation Sector” (code 
MGACB) from Energy Information Administration (EIA) State Energy Data System.127
6
Plus
Federal Diesel 
Fuel Tax
National total from NIPA TOPI table, series on Federal Diesel Fuel Excise Tax (Table 3.5, Line 
7).128 
Allocated to states using disposable personal income by state, as calculated by Tax Foundation.129 
7
Plus
Federal Tobacco 
Tax
National total from NIPA TOPI table, series on Federal Tobacco Excise Tax (Table 3.5, Line 6).130
Allocated to states using adult cigarette use from Centers for Disease Control And Prevention 
(CDC).131
8
Plus
Federal Alcohol 
Tax
National total from NIPA TOPI table, series on Federal Alcohol Excise Tax (Table 3.5, Line 5).132
Allocated to states using alcohol consumption data from CDC.133 
9
Plus
Federal Air 
Transport Tax
National total from NIPA TOPI table, series on Federal Air Transport Excise Tax (Table 3.5, Line 
8).134 
Before allocation to states is done, business and international was first subtracted using Tourism 
Satellite Accounts data135 (remainder is assumed to be personal travel).
Personal portion allocated to states using state personal air travel data from 1995 American 
Travel Survey transportation mode data136 (recent years were extrapolated using population 
growth). Business portion allocated using disposable personal income by state, as calculated by 
Tax Foundation.137
10
Plus
Federal Windfall 
Profits Tax
Not applicable for recent years, but for 1980s, national total from NIPA TOPI table, series on 
Federal Air Windfall Profits Excise Tax (Table 3.5, Line 9).138
Allocated 50 percent via disposable personal income139 and 50 percent based on “Motor Gasoline 
Consumed by the Transportation Sector” (code MGACB) from EIA State Energy Data System.140
11
Plus 
Other Federal 
Excise Taxes
National total from NIPA TOPI table, series on Other Excise Tax (Table 3.5, Line 10).141
Allocated using disposable personal income by state, as calculated by Tax Foundation.142
12 Plus
Federal Customs
National total from NIPA “Federal Government Current Receipts and Expenditures” table, 
“Customs Duties” series (Table 3.2, Line 6).143 
Allocated using disposable personal income by state, as calculated by Tax Foundation.144
13
Plus 
State and 
Local Taxes on 
Production and 
Imports
National total from NIPA “State and Local Government Current Receipts and Expenditures” table, 
“Taxes on Production and Imports” series (Table 3.3, Line 6).145
Allocated using Tax Foundation state and local tax burdens (only those components counted by 
BEA in TOPI, which excludes items such as personal taxes, corporate income taxes, and estate 
and gift taxes).
14
Less
Subsidies 
Received
National total from NIPA “Federal Government Receipts and Expenditures” table, “Subsidies” 
series (Table 3.2, Line 32).146
Allocated to states using “Subsides” (all industry total) from the Gross Domestic Product by State 
(industry code 101).147 
20
15
Less
Nonfungible 
portion of 
Medicare
National total from NIPA “Government and Social Benefits” table, “Medicare” series (NIPA Table 
3.12, Line 6)148 minus adjustment for underreporting in Current Population Survey as outlined in 
Urban Institute study149). Adjustment made so that only nonfungible portion is used.
Allocated to states using “Medicare Benefits” from Annual State Personal Income (SA 35, Line 
111).150
16
Less
Nonfungible 
portion of 
Medicaid
National total from NIPA “Government and Social Benefits” table, “Medicaid” series (NIPA Table 
3.12, Line 33)151 minus adjustment for underreporting in Current Population Survey as outlined in 
Urban Institute study152). Adjustment made so that only nonfungible portion is used.
Allocated to states using “Medicaid Benefits” from Annual State Personal Income (SA 35, Line 
113).153
17
Less
Pension and 
life insurance 
contributions
National total from NIPA “Employer Contributions for Employee Pension and Insurance Funds 
by Industry and by Type” table (Table 6.11),154 summation of lines 23 and 33 (“Pension plans” and 
“Group life insurance” under “Employer contributions for employee pension and insurance funds.”
Allocated to states using “Supplements to wages and salaries by place of work” from Annual 
Quarterly Personal (SQ7N, Line 50).155
18
Less
Investment 
income of 
life insurance 
carriers and 
pension plans
National total from former NIPA Table 7.19 (BEA no longer produces this table as it used to be. 
Old data is used and then recent years are extrapolated using population growth.)
Allocated to states using “Personal dividend income” (SA30, Line 91) and “Personal interest 
income” (SA30, Line 92) from Annual State Personal Income.156 Recent years, if unavailable, are 
extrapolated using “Dividends, interest, and rent” from Quarterly State Personal Income (SQ4, 
Line 47).157
114. Bureau of Economic Analysis, National Income and Product Accounts Tables, http://www.bea.gov/iTable/iTable.
cfm?ReqID=9&step=1#reqid=9&step=1&isuri=1 [hereinafter BEA NIPA Tables].
115. Bureau of Economic Analysis, Regional Economic Accounts, http://www.bea.gov/iTable/iTable.
cfm?ReqID=70&step=1#reqid=70&step=1&isuri=1 [hereinafter BEA Regional Tables].
116. Internal Revenue Service, SOI [Statistics of Income] Tax Stats – Historic Table 2, http://www.irs.gov/uac/SOI-Tax-Stats---Historic-
Table-2 [hereinafter IRS Statistics of Income].
117. BEA Regional Tables, supra note 112.
118. BEA NIPA Tables, supra note 111.
119. Internal Revenue Service, SOI [Statistics of Income] Tax Stats – Historic Table 2, http://www.irs.gov/uac/
SOI-Tax-Stats---Historic-Table-2.
120. BEA Regional Tables, supra note 112.
121. BEA NIPA Tables, supra note 111.
122. IRS Statistics of Income, supra note 113.
123. BEA Regional Tables, supra note 112.
124. Id.
125. Id.
126. BEA NIPA Tables, supra note 111.
127. Energy Information Administration, State Energy Data System (SEDS), http://www.eia.gov/state/seds/.
128. BEA NIPA Tables, supra note 111.
129. See note 35 for definition of disposable personal income.
130. BEA NIPA Tables, supra note 111.
131. Centers for Disease Control and Prevention, Behavioral Risk Factor Surveillance System via WEAT: Web Enabled Analysis Tool, http://
apps.nccd.cdc.gov/s_broker/WEATSQL.exe/weat/freq_Year.hsql. 
132. BEA NIPA Tables, supra note 111.
133. Centers for Disease Control and Prevention, Behavioral Risk Factor Surveillance System via WEAT: Web Enabled Analysis Tool, http://
apps.nccd.cdc.gov/s_broker/WEATSQL.exe/weat/freq_Year.hsql.
134. BEA NIPA Tables, supra note 111.
135. “Domestic passenger air transportation services, business” and “Domestic passenger air transportation services, nonresidents” 
from Table 3, “Demand for Commodities by Type of Visitor” (no longer published by BEA), of Bureau of Economic Analysis, 
Satellite Industry Accounts Data, http://www.bea.gov/industry/tourism_data.htm.
136. “Person Trip Characteristics” section, “Principal Transportation from Origin to Destination” (specific field name is 
“TransportOriginDest”) of Bureau of Transportation Statistics, American Travel Survey (ATS) 1995, http://www.transtats.bts.gov/
Tables.asp?DB_ID=505&DB_Name=American+Travel+Survey+(ATS)+1995&DB_Short_Name=ATS.
137. See note 35 for definition of disposable personal income.
138. BEA NIPA Tables, supra note 111.
139. See note 35 for definition of disposable personal income.
140. Energy Information Administration, State Energy Data System (SEDS), http://www.eia.gov/state/seds/.
141. BEA NIPA Tables, supra note 111.
142. See note 35 for definition of disposable personal income.
143. BEA NIPA Tables, supra note 111.
144. See note 35 for definition of disposable personal income.
145. BEA NIPA Tables, supra note 111.
146. Id.
147. BEA Regional Tables, supra note 112.
148. Id.
21 149. The Urban Institute, Laura Wheaton, Underreporting of Means-Tested Transfer Programs in the CPS and SIPP (Jan. 1, 2007), http://
www.urban.org/UploadedPDF/411613_transfer_programs.pdf. 
150. BEA Regional Tables, supra note 112.
151. BEA NIPA Tables, supra note 111.
152. Id. 
153. BEA Regional Tables, supra note 112.
154. Id.
155. Id.
156. Id.
157. Id.