Austin Chamber

January 13, 2015 – Tax Burden Per Capita & Other State & Local Government Revenue Trends

Posted By Beverly Kerr | Jan 13, 2015
Central Texas Economy in Perspective Print Article Austin Chamber

State and local government tax collections totaled $97.7 billion in Texas in 2012 according to new state and local government finances data released in December by the U.S. Census Bureau. That total amounts to $3,750 per person for the year. The burden of taxes on a per capita basis is relatively low for Texas residents. Texas state and local taxes per capita are 15.2% lower than the $4,424 paid nationally. Twenty states have lower per capita state and local tax burdens in 2012 than Texas. It may be notable that Texas' position has been slipping in this ranking. Now at 21st lowest, Texas was 18th last year and 16th five years ago.

A common alternative tax burden measure is state and local taxes per $1,000 of personal income. In 2012, the national ratio is $100 of state and local taxes per $1,000 of personal income. Texas’ state and local taxes amount to $87 per $1,000 of personal income, which is the 11th lowest nationally. In 2011, Texas ranked tenth, and in 2007, the state ranked fifth.

Annual Census Bureau tabulations of revenue, expenditure, debt, and assets provide an opportunity to consider the relative total tax burdens across the nation and to examine differences in reliance on the several tax types, as well as other sources of government revenue. Quinquennial Census of Governments years, such as 2012, offer an expanded array of this data.

Of the $3,750 in state and local taxes paid per capita in Texas in 2012, $1,547 is for property taxes, $1,741 is for sales and gross receipts taxes, and $463 is for other taxes. Per capita rates for these same taxes nationally are a little lower, as most other states have individual and corporate income taxes as additional sources of revenue. The relative contributions of property, sales and other taxes to total tax revenue in Texas has not changed significantly over the last five years.

Taxes represent about 53% of total state and local general revenue(1) in both 2007 and 2012 in Texas. Across all states, taxes account for 53.4% of all revenue in 2012, down from 55.1% in 2007. The second most significant component of state and local general revenue is federal intergovernmental revenue. This increased 25.7% across all states and by 34.0% in Texas between 2007 and 2012. In 2012, 22.5% of Texas’ state and local revenue comes from the federal government, compared to 20.0% in 2007.

In Texas, state and local tax revenue increased by 19.2% between 2007 and 2012 and total general revenue increased by 19.4%. Local government tax revenue increased 17.9% and local general revenue increased 17.4%. School districts, which account for about half of local government revenue in Texas, saw markedly lower growth. Total general revenue of school districts increased by only 11.7%. School district tax revenue increased just 6.6% between 2007 and 2012 and other “own sources” of school district revenue, i.e., charges and miscellaneous general revenu(2), declined by 28.0%, so that total general revenue from own sources only gained 1.0%.  Increased intergovernmental revenue from the state to school districts (up 25.3%) is what helped make up the difference.

Nationally, state and local tax revenue gained 8.2%, while total general revenue increased by 11.5%. School districts’ total general revenue increased less—only 5.2%. School district tax revenue increased by 11.8% while, as in Texas, charges and miscellaneous general revenue declined (by 21.0%). Between 2007 and 2012, intergovernmental revenue to school districts increased by 5.0%.

Nationally, intergovernmental revenue accounts for 55.2% of school district general revenue, compared to 49.1% in Texas in 2012.

School districts in Texas are more dependent on property tax revenue than are school districts nationwide. In Texas the property tax accounts for 89% of own-source general revenue of school districts and 45% of their total general revenue.  Nationally, property tax revenues are 82% of own-source general revenue and 37% of total general revenue.

Total revenue for state and local government is made up of general revenue, plus utility revenue, liquor store revenue, and insurance trust revenue (unemployment compensation, employee retirement, and workers compensation). While state and local general revenue was up 11.5% nationally, total revenue declined between 2007 and 2012 by 1.1% because of the decline in employee retirement revenue. Employee retirement insurance trust revenue, which accounted for 17.4% of total revenue in 2007, was 67.7% lower in 2012. State and local employee retirement revenue also fell in Texas, but by a lesser magnitude (27.0%). While general revenue gained 19.4% between 2007 and 2012, negative growth in insurance trust revenue helped hold back total revenue growth to 13.7%.

The decline in interest earnings between 2007 and 2012 is the next most significant contributor, nationally and in Texas, to lower state and local revenue growth than might otherwise have been seen, other things being equal. In Texas in 2007, interest earnings were 6.7% of own-source revenue and 4.2% of total revenue. These earnings dropped by 40.5% between 2007 and 2012.

While state and local general revenue is up 19.4% in 2012 over 2007 in Texas, considerably outstripping growth nationally, Texas saw population growth of 9.4% over the same period. Thus, on a per capita basis, general revenue is up only 9.2% over 2007. Five years of inflation also cuts into growth over this period. Texas’ real per capita state and local general revenue is down 1.4% in 2012 compared to 2007. State and local tax revenue per capita is also below what it was five years ago in real terms.

Footnotes:


(1) General Revenue is made up of Intergovernmental Revenue and General Revenue from Own SourcesGeneral Revenue from Own Sources is made up of Tax Revenueand Charges and Miscellaneous General RevenueTotal Revenue is General Revenueplus Utility RevenueLiquor Store Revenue (which is not a revenue source in Texas), and Insurance Trust Revenue.


(2) Miscellaneous General Revenue includes interest earnings, special assessments, sale of property and Other General RevenueOther General Revenue includes fines and forfeits, rental revenue on government-owned properties, royalties, donations from private sources, net lottery revenue, dividends received by the state government, and miscellaneous revenue not elsewhere classified.

Beverly Kerr

Vice President of Research, Beverly Kerr, joined the Chamber’s Economic Development Department in 2004, following 10 years in a similar role with the Kansas City Area Development Council. Beverly earned an M.A. in economics at the University of Missouri-Kansas City.