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The Costs of Occupational Licensing in Tennessee & Avenues for Reform

From: Beacon Center of Tennessee

Key Takeaways:

  • While Tennessee is generally considered a more free-market-oriented state, one area it regulates more heavily is in occupational licensing, essentially a government permission slip to do a job;
  • Tennessee has over 263 different occupational licenses, registrations, and certifications, covering 30 percent of the Tennessee workforce;
  • The economic cost of obtaining these onerous licensing regulations conservatively costs Tennessee workers over
    $279 million just to enter an occupation of their choice; and
  • Renewing their existing license costs these Tennessee workers nearly $38 million per year.

Del. Lawmaker claims Republican Bills are read less often than Democratic Bills

From: WMDT

Rep. Bryan Shupe claims republican bills are being overlooked in Delaware’s legislature.

Delaware’s legislature has a rule that all bills must be heard within 12 days of being introduced, in order to progress into committee. Shupe tells us that’s not happening and the number of bills left unread is not evenly split between both parties. He says he had his staff look at the House Administrative Committee hearings from the previous session, where they found, the republican minority had bills read 36 percent of the time compared to 86% for Democrats; which he points to as a bias from leadership.

“Rules that all 41 of us unanimously agreed on, to have every single bill heard in respective their committees are not being followed and its following political lines,” Rep. Shupe said.

In response, Shupe says next session he’ll introduce a measure on the first day of the session as an amendment to the rules that would require all bills to be introduced if they aren’t read in the 12-day window. He tells us he understands why in the past not all bills were read, as a result of a scheduling conflict, bills being combined with others, but he says the gap needs to close between the read rate of republican and democrat bills.

“Those percentages through minority and majority bill should be a lot closer than 86 to 38 percent they should be closer,” Shupe said adding “let them get heard and go through the process and if they die in committee that’s the nature of these things but to not have them heard is frustrating.”

The Delaware House Majority declined to comment on the numbers referenced by Shupe, or his claim of bias.

Delaware’s legislature does have a process to have an unread bill be reintroduced, but such a move would require a “written request of the majority of the members elected to the House, be reported to the House for a decision as to its further disposal,” according to House Resolution 3 passed in 2021, which could prove challenging for a bill introduced by a minority party.  

Washington state ranked No. 14 for economic development transparency

From: The Center Square

Washington state ranked 14th in the country among the 50 states and the District of Columbia in terms of economic development transparency, according to a new report from Washington, D.C.-based Good Jobs First, a public policy resource center.

Washington received credit for the transparency of its programs exempting data centers from paying sales and use taxes on electricity, computers, building materials, and software. On a scale of 0 to 100, Washington scored 38 points for its data center sales and use tax exemption. Washington scored 38 points on its aerospace preproduction expenditures B&O tax, and 47 points for its Job Skills Program.

The Evergreen state was dinged for having no recipient data online regarding refundable or transferable tax credits to film and/or television productions, scoring zero points in that category.

“The Washington Department of Revenue posts basic recipient-level data (company names, subsidy payments, and job/wage data) on dozens of tax-based subsidies,” the report said. “On the good side, the data is (mostly) easy to access and use.”

Washington ranked 30.8 overall on a 100-point scoring system, which is higher than the national average of 22. That’s a drop of three points for Washington since a similar Good Jobs First study in 2014.

Based on evaluating 250 major state-level economic development programs in all 50 states and the District of Columbia, Good Jobs First found that 154 of them disclose which companies receive public support, while 96 do not. Good Jobs First found that 48 states and the District of Columbia provide some degree of recipient disclosure.

“To be sure, transparency is not the same as effectiveness or accountability,” the report notes. “Nor do we have the means here to verify the accuracy of what states post online. But without company specific, deal-specific disclosure, it’s difficult for the public to get at even the most basic return on investment, accountability or equity questions.”

The report goes on to ask, “Which companies are recipients? What kinds of companies are they? How much money did they receive? Are they delivering on the number of jobs promised? Constituents deserve to have answers to these questions. Without them, they cannot have an informed debate and policymakers cannot properly monitor programs or deals.”

Nevada was the top-ranked state on the list. Its 63.6-point score was a dozen points better than runner-up Connecticut (51.6 points). Illinois’ 46.4 points earned it third place on the list.

Alabama and Georgia brought up the rear in scoring zero points each.

Darby ordinance would make Wilm employers pay for shift changes

From: Delaware Live

Business leaders are lining up in opposition to a proposed ordinance in Wilmington that would require service industry employers to provide two-weeks notice of work schedules and compensate employees when changes occur.

The measure, sponsored by Council Member Shané Darby, D-District 2, aims to provide more schedule stability for hourly workers at retail, hospitality and foodservice establishments with 250 employees or more and franchises with less than 250 employees.

The proposed ordinance would allow workers to decline shifts not included in a posted work schedule or shifts that do not provide at least 9 hours of rest after a previous shift.

If asked to work shifts that don’t allow for 9 hours of rest, employers would be required to pay workers an extra $40, in addition to their regular compensation.

“The reason why I’m doing this is because I care about working-class people, especially the most vulnerable groups,” Darby said. “I think that Wilmington could be the catalyst to what it looks like to protect workers, protect workers’ rights, and to make sure that people are able to work and live.”

Council Member James Spadola, R-At Large, called the proposal “a solution in search of a problem.”

He said businesses unable to keep up with the regulatory burdens imposed by the city can easily open shop elsewhere.

The proposed rules could also hurt workers, opponents say.

“This potential ordinance puts part-time workers under attack,” said Carrie Leishman, president and CEO of the Delaware Restaurant Association. “This is a counterproductive and dangerous ordinance at a time where Delaware restaurants still have 4,500 open positions.”

Under the bill, for each employer-initiated change to a posted work schedule, employers must pay an employee “predictability pay” at the following rates, in addition to the employee’s regular pay for hours actually worked by the employee:

  • 1 hour of predictability pay when the covered employer adds time to a work shift or changes the date or time or location of a work shift, with no loss of hours.
  • 1/2 hour of predictability pay for any scheduled hours the employee does not work for the following reasons:
    • Hours are subtracted from a regular or on-call shift, or
    • A regular or on-call shift is canceled.

The bill also requires employers to offer shifts to existing employees and pay any subsequent penalties before offering the shift to contractors or temporary employees.

“We’re trying to tackle the big dogs first and then kind of look at the conversation around what it looks like to have fair legislation for small and local businesses,” Darby told Delaware LIVE News.

Darby said she’s not concerned that the ordinance could hurt businesses struggling to make ends meet in the wake of the pandemic.

“If we were talking about a small local business then I might say ‘okay, I can look at that,’ but not for big businesses like the Marriott or the DoubleTree,” she said. “I don’t think the hotel industry has been hit that hard due to the pandemic. I’ll have to look at the data and research but people have been traveling – I don’t think they have been impacted that much.”

Data shared during a city budget hearing Monday shows the city’s lodging tax revenues are still below pre-pandemic levels.

The Restaurant Association’s Leishman called the proposal “politically motivated.”

She said it’s “fueled by the campaign donations of labor unions as a way to boost up dwindling union participation and pit small businesses against employees” by reducing part-time and flexible job opportunities.

Asked who she thinks might oppose the legislation, Darby laughed then responded: “Hospitality, retail and foodservice establishments that employ 250 employees or more.”

She emphasized that the law would apply to franchised businesses that employ less than 250 employees in city limits.

“You can be a franchise in Wilmington and only hire 20 or 30 people, but if you’re a part of a bigger network like McDonald’s, then you are subject to this legislation.”

Bob Older, president of the Delaware Small Business Chamber, said including franchisees like hotels and fast food restaurants in the bill is “irresponsible and uneducated.”

“You’re telling me that a Dunkin’ Donuts with 10 employees must abide by this regulation but a bakery with 20 employees that’s next door to them doesn’t,” Older asked. “Just because you’re a franchise doesn’t mean that you’re anything more than a small business.”

He said despite small businesses already being short-staffed and under pressure from external factors like inflation and supply chain disruptions, Delaware’s lawmakers think now is the right time to impose even more costly burdens on businesses.

“With this ordinance, you’ll be penalizing businesses twice,” he continued. “If somebody doesn’t show up to work, they call somebody in and change the schedule – they’re gonna have to compensate that person even more. That’s not to mention the worker who called out.”

Older predicts that because of legislation like the fair workweek ordinance, companies are going to continue resorting to automation, something he said is “unfortunate.”

Darby sees it differently. The bill, she said, isn’t meant to be a burden on businesses, but rather an extra layer of protection for workers who are vulnerable and often taken advantage of by their wealthy employers.

Leishman believes the measure would result in “a mountain of red tape” and cost jobs for those who rely on their paychecks the most.

Restaurants, she argued, offer flexible scheduling opportunities which workers embrace, specifically relating to first-time jobs and second-chance opportunities in downtown Wilmington where the 6.2% unemployment rate far exceeds the state’s unemployment rate of 4.5%.

Leishman believes the measure discourages employers from offering extra shifts on short notice.

“Restaurants are an industry of choice and employees can be free to pick up shifts that so often meet the needs of their financial circumstances,” she said.

Many people who work in hospitality are putting themselves through school or have full-time jobs and careers elsewhere, but need extra money for personal reasons, she said.

Leishman pointed to San Francisco, the first city to embrace “fair workweek” laws. The result, she said, has been predictable.

survey conducted by Lloyd Corder of Corcom Inc. found that 20% of affected businesses cut back on the number of part-time hires, and a similar number were scheduling fewer employees per shift.

More than one-third of affected employers began offering less schedule flexibility as a consequence of “fair workweek” laws, the survey found.

“There is nothing ‘fair’ in ‘fair scheduling’ for the employer and employee,” Leishman concluded.

Darby said employees will be responsible for reporting violations of the law to a labor commission that the bill would create. In the future, she hopes the city will allocate funds to hire an investigator to look into complaints.

Although it creates a labor commission, the bill wouldn’t cost any money, she said.

Spadola cast doubt on that claim.

“I would disagree that there’s no fiscal impact because every hour of work our city employees dedicate to this will cost the city money,” Spadola said.

“Throughout the countless civic association meetings I’ve attended in every area of the city, not one person has ever brought this up as a problem, nor has anybody reached out to me about it as a problem, nor has anybody ever spoken about it during public comment in a council meeting, as far as I know.”

In addition to hurting businesses and workers, Spadola feels the bill will hurt the city’s bottom line.

“The city needs funding to pay for city employees, for the services that the city provides, for firefighters, police, everything,” he said. “One of the ways the city raises those funds is through wage taxes, and so at a time when we need more businesses to come in here and boost up our wage tax, we can’t be passing unfriendly ordinances that will make them go elsewhere.”

Spadola plans to vote against the bill and he’s hoping others do too.

“I wish I could say it doesn’t stand a chance,” he said. “I don’t think it will pass, but if it did, I would actively encourage the mayor to veto it because I don’t think the city could stand for this at this time.”

Bob Chadwick, president of the New Castle County Chamber of Commerce, said his group opposes the proposed ordinance because employment law is already regulated at the state and federal level.

In a state the size of Delaware, two levels of government oversight are sufficient, Chadwick said.

“The legislation would add unnecessary burdens for employers, remove their ability to be flexible in running their businesses, increase costs by requiring them to pay employees for canceled shifts, and unreasonably interfere in their relationships with their employees, many of whom went into the retail, hospitality or food service industries for the scheduling flexibility,” he continued.

“The ordinance sends the wrong message to existing and prospective Wilmington employers. Employers in the City of Wilmington are already subject to a wage tax and a head tax, and legislation such as this which would increase costs, impose burdensome regulation, and limit flexibility will make it act as a disincentive to open or maintain businesses within the city.”

Efforts to reach the Delaware Food Industry Council, the group that represents grocery stores and pharmacies, were unsuccessful.

Spokespeople for Mayor Mike Purzycki and the Delaware State Chamber of Commerce said they weren’t prepared to comment Monday.

Darby said she hasn’t reached out to any of the state’s chambers of commerce to get a sense for how the bill would impact businesses in the city.

“That might be a good entity to reach out to just to see if they were supportive or not,” she said. “It wouldn’t change the legislation, but that would be good to just know.”

Op-Ed: Costs of occupational licensing fall heaviest on vulnerable Tennesseans

From: The Center Square

When professions utilize occupational licensing to impose unnecessarily burdensome requirements and fees to deny entry to a profession, occupational choice and economic opportunity are drastically limited in the Volunteer State.

Sadly, these costs fall the hardest on the most vulnerable populations.

The evidence shows occupational licensing makes it harder to obtain certain jobs, especially for minority and low-income residents. Education, experience, and financial costs tend to be a greater burden for underserved populations because of a lack of access to quality formal education and financial resources. And, by restricting occupational choice, licensing can serve to deny economic opportunity to minority and low-income residents.

Historically, licensing laws were pursued in some cases with the harmful intent of denying economic opportunity to African Americans. This was certainly true for some licensed professions in Tennessee, such as barbers.

An archival search of newspapers could not locate a single instance of consumer harm from unlicensed barbers before the first major attempts to license the profession in Nashville in 1903. In fact, the Tennessean asked at that time, “Is there sound reason for the enactment of a barbers’ licensing law?”

The purpose, however, was clear to African American barbers who strongly opposed the licensing laws. They saw that the effect of licensing would put them out of business. Barber exams in Chattanooga by the 1940s, for instance, accomplished this through an exam that required prospects to needlessly memorize barber terms in Latin giving a distinct advantage to those with access to financial resources and quality education.

This trend continues today as licensing laws still mau create discriminatory outcomes. For example, a recent study in the Journal of Midwifery & Women’s Health found racism is still “common in midwifery education, professional organizations, and clinical practices.”

Occupational licensing also can harm minority and low-income residents by pricing services beyond their ability to pay. Licensing in a wide range of industries, including barbers, electricians and plumbers, decreases the availability and quality of these services for low-income residents. The increased cost of service forces these residents to choose between going without the service, recklessly performing the service themselves, or to hire someone under the table.

Our new study, The Costs of Occupational Licensing in Tennessee, offers several avenues of reform for policymakers looking to empower our most vulnerable populations.

Policymakers should eliminate any occupational licensing requirements with no credible and documented threat to consumer safety. Even when plausible harm exists, policymakers should take into consideration whether other mechanisms, such as certification, private litigation, insurance or warranties, could assure consumers of quality without empowering industries to restrict occupational mobility and economic opportunity for the least advantaged.

Tennessee policymakers can best serve our most vulnerable populations by thoroughly reviewing and reforming Tennessee’s licensure laws to reduce the imposed burden on all residents.

States Whose Unemployment Rates Are Bouncing Back Most

From: Wallet Hub

March’s jobs report showed a slowdown in growth. The economy gained 431,000 nonfarm payroll jobs, compared to 750,000 the previous month. In March, there were notable gains in sectors including leisure and hospitality, professional and business services, retail trade, and manufacturing.

Now, the U.S. unemployment rate sits at 3.6%, which is still slightly higher than it was before the pandemic but is far lower than the nearly historic high of 14.7% in April 2020. This overall drop can be attributed largely to a combination of vaccinations and states removing restrictions. It will take more time for us to reduce the unemployment rate to pre-pandemic levels than it did for the virus to reverse over a decade of job growth, though.

In order to identify the states whose unemployment rates are bouncing back most, WalletHub compared the 50 states and the District of Columbia based on six key metrics that compare unemployment rate statistics from the latest month for which data is available (March 2022) to key dates in 2019, 2020 and 2021.

Main Findings

State Rank
Nebraska 1
Indiana 2
Montana 3
Utah 4
Kansas 5
Minnesota 6
New Hampshire 7
Oklahoma 8
Arizona 9
Alabama 10
South Dakota 11
Idaho 12
Arkansas 13
Wisconsin 14
Virginia 15
Vermont 16
West Virginia 17
Tennessee 18
Rhode Island 19
Florida 20
Wyoming 21
Georgia 22
North Carolina 23
North Dakota 24
Mississippi 25
Louisiana 26
Missouri 27
Iowa 28
South Carolina 29
Oregon 30
Ohio 31
Colorado 32
Washington 33
Kentucky 34
Maine 35
New Jersey 36
Michigan 37
Nevada 38
Pennsylvania 39
Alaska 40
New York 41
Texas 42
Illinois 43
Connecticut 44
Delaware 45
California 46
Massachusetts 47
Maryland 48
New Mexico 49
Hawaii 50
District of Columbia 51
Overall Rank  State Unemployment Rate (March 2022)  Change in Unemployment (March 2022 vs March 2019)  Change in Unemployment (March 2022 vs January 2020)  Change in Unemployment (March 2022 vs March 2020)  Change in Unemployment (March 2022 vs March 2021)  Not Seasonally Adjusted Continued Claims (March 2022 vs March 2019) 
1 Nebraska 2.0% -31.9% -33.6% -53.5% -23.2% -37.8%
2 Indiana 2.2% -35.7% -36.8% -37.1% -48.9% 11.8%
3 Montana 2.3% -30.8% -35.6% -32.8% -34.0% -39.0%
4 Utah 2.0% -21.8% -19.8% -19.6% -33.5% -31.2%
5 Kansas 2.5% -21.7% -21.0% -19.8% -29.1% -51.9%
6 Minnesota 2.5% -27.7% -36.5% -40.6% -31.8% -6.3%
7 New Hampshire 2.5% -5.6% -9.9% -8.6% -36.5% -41.7%
8 Oklahoma 2.7% -12.9% -14.0% -16.3% -43.2% -16.1%
9 Arizona 3.3% -29.5% -32.4% -33.9% -42.7% -32.0%
10 Alabama 2.9% -16.0% -12.8% -19.2% -20.6% -73.7%
11 South Dakota 2.5% -10.4% -5.2% -0.2% -21.2% -30.2%
12 Idaho 2.7% -3.5% -7.3% -3.0% -30.5% -34.3%
13 Arkansas 3.1% -11.8% -14.0% -39.5% -33.1% -29.6%
14 Wisconsin 2.8% -7.4% -8.0% -1.1% -34.8% -24.4%
15 Virginia 3.0% -0.3% 11.0% 1.6% -31.5% -69.2%
16 Vermont 2.7% 16.1% -3.1% -7.8% -30.0% -35.0%
17 West Virginia 3.7% -24.4% -28.7% -29.3% -34.4% -45.1%
18 Tennessee 3.2% -3.9% -8.6% -9.3% -32.6% -29.7%
19 Rhode Island 3.4% -2.0% -5.9% -5.4% -42.6% -20.7%
20 Florida 3.2% -2.8% 17.7% -25.7% -37.8% -6.9%
21 Wyoming 3.4% -0.4% -28.9% -35.5% -31.4% -7.1%
22 Georgia 3.1% -13.9% -9.8% -13.8% -28.0% 23.1%
23 North Carolina 3.5% -6.0% -5.8% -4.6% -31.3% -30.7%
24 North Dakota 2.9% 25.5% 36.6% 11.3% -32.6% -22.2%
25 Mississippi 4.2% -21.7% -25.1% -28.0% -34.0% -39.8%
26 Louisiana 4.2% -8.0% -19.3% -39.1% -30.6% -23.5%
27 Missouri 3.6% 16.2% 9.3% 2.3% -25.7% -39.7%
28 Iowa 3.3% 27.6% 21.8% 24.8% -24.9% -40.3%
29 South Carolina 3.4% 9.8% 26.3% 15.3% -20.3% -36.1%
30 Oregon 3.8% 0.6% 16.4% 14.6% -36.3% -21.4%
31 Ohio 4.1% -0.3% -10.6% -15.2% -27.5% -26.9%
32 Colorado 3.7% 41.9% 40.5% -23.1% -38.2% -35.9%
33 Washington 4.2% -6.7% 8.3% -20.5% -26.7% -29.1%
34 Kentucky 4.0% -2.5% -1.8% -2.3% -13.0% -48.0%
35 Maine 3.6% 29.8% 22.4% 31.4% -23.8% -13.9%
36 New Jersey 4.2% 27.3% 15.1% 25.2% -40.1% -14.6%
37 Michigan 4.4% 4.5% 14.0% 16.4% -27.6% -27.1%
38 Nevada 5.0% 12.7% 28.6% -38.8% -46.1% -21.1%
39 Pennsylvania 4.9% 8.6% -0.4% -7.3% -31.3% -34.7%
40 Alaska 5.0% -8.2% -0.6% 0.0% -26.7% -33.9%
41 New York 4.6% 15.2% 11.6% 12.9% -43.1% 7.4%
42 Texas 4.4% 29.9% 32.1% -9.7% -29.8% -15.7%
43 Illinois 4.7% 5.0% 25.0% -6.4% -29.4% -12.7%
44 Connecticut 4.6% 24.4% 27.8% 30.8% -33.2% -38.5%
45 Delaware 4.5% 28.9% 27.8% -7.3% -20.8% -33.2%
46 California 4.9% 15.8% 16.6% -11.4% -41.0% 0.8%
47 Massachusetts 4.3% 33.4% 42.4% 47.5% -32.7% -16.6%
48 Maryland 4.6% 41.0% 9.5% 4.7% -17.3% -27.9%
49 New Mexico 5.3% 2.6% -0.9% -12.9% -25.9% -8.1%
50 Hawaii 4.1% 40.1% 94.3% 83.0% -37.2% -1.0%
51 District of Columbia 6.0% -0.8% 7.6% 3.2% -8.0% -27.5%

 

Delaware needs a “tax-free carbon holiday” to review RGGI’s wasteful program

From: Caesar Rodney Institute

You may not be aware that Delaware has a tax on carbon dioxide emissions from power plants. In 2009 power companies were required to start buying allowances from the Regional Greenhouse Gas Initiative (RGGI) program to emit carbon dioxide. The allowance cost was added to electric bills but was hidden from customers.

So far, under the RGGI program, Delaware has received $187 million in revenue, and as much as $100 million may be sitting unspent. The state program intended to reduce emissions may actually be increasing emissions globally.

We recommend a legislatively mandated one-year RGGI “tax-free carbon holiday” that would include a thorough review of the program and how the tax revenue is allocated.

In 2016 Delaware generated 78% of its electric demand in-state, but in 2021 we were down to 36%. We may be close to zero in-state generation as early as 2024. That means lost jobs, lost state and local tax revenues, higher electric rates, and possibly lower power reliability.

Low use of power plants can double emissions (see graph below), and longer transmission lines add another 10% to emissions. 

 

RGGI4.5.2022.png

Our peer-reviewed study comparing RGGI states to non-RGGI states with otherwise similar energy policies shows that RGGI doesn’t work to reduce emissions. 

We estimate RGGI added 357,000 tons of CO2 per year to global emissions in 2021. At first, the allowances only cost a few dollars per ton, and electricity wholesale prices were higher than today.

However, the latest auction price was $13.50 a ton, and that means Delaware natural gas power plants have to bid 15% higher into the regional grid than utilities in non-RGGI states to cover the tax, so they lose bids and don’t generate as much power.

Delaware’s lone emitting coal-powered plant in Millsboro must bid 34% higher prices as it emits over twice as much per unit of power as natural gas. NRG Energy has announced a plan to close the facility this year as it only operates about 15% of the time and can’t cover the overhead.

The multistate RGGI manager forecasts electric rates rising by 40% by 2030 as higher allowance prices influence wholesale power prices even in non-RGGI states and importing our power may increase costs by another 5% to cover the average line losses and congestion charges based on PJM data.

Legislation requires 65% of RGGI revenue to go to the Delaware Sustainable Energy Utility (DESEU), a private non-profit that provides grants for energy efficiency projects.  

Their budget and audit reports show they spend only about $7 to $8 million a year on program grants and administrative costs. Their reports show only about 4,000 tons of annualized CO2 emissions savings or a cost of about $2,000/ton.

Emission savings claims are not backed by the audit that matters; before and after project electric and gas meter readings, so the claimed savings are doubtful.

RGGI revenue to the DESEU was $24 million in 2021 and should rise to $34 million in 2022. The DESEU has been accumulating unspent funds for over a decade and likely had $73 million by the end of 2021, and will be close to $100 million by the end of 2022, or about 13 years of expenses.

They have been giving loans to boost interest revenue and minimize their stash of cash. Still, there is no evidence that the projects they have financed couldn’t have been borrowed elsewhere.

Clearly, it is time to stop sending money automatically to the DESEU. They could still receive Grant-in-Aide grants from the state as many other private nonprofits do.

Delaware’s Department of Natural Resources & Environmental Control (DNREC) receives 35% of the RGGI revenue. 

Delaware’s Low-Income Home Energy Assistant Program receives 5% to help pay utility bills. The DNREC’s low-income Weatherization Assistance Program (WAP) receives 10% or almost $4 million in 2021. DNREC can spend the balance of about $7 million in 2021, supporting energy efficiency and renewable energy programs.

A DNREC website lists WAP projects completed by date. 

It appears the WAP program has essentially closed for the last two pandemic years. Past annual reports from the Energy Efficiency Advisory Council suggest DNREC may only be spending $2.5 million a year on WAP and about $3.5 million on other projects from the RGGI funds.

DNREC has not responded to a Freedom of Information Act request for the recent spending history of RGGI funds or the total amount of unspent RGGI funds they have accumulated. Extrapolating from past reports, DNREC may have $20 to $25 million in unspent RGGI funds and would not suffer from a RGGI “tax-free carbon holiday.”

The US Energy Information Administration just released survey results and found that 25 million American families (27%) reported forgoing basic necessities to pay energy bills sometime in 2020, while 7 million of those families reported doing so every month. 

With inflation raging and energy costs hurting the poor and middle class, a RGGI “tax-free carbon holiday” makes sense. It makes even more sense to reconsider the entire RGGI program and its allocation of RGGI revenues. We note that New Hampshire returns RGGI revenue to electric customers, and Connecticut sends all RGGI revenue to its General Fund.

State and Local Tax Burdens, Calendar Year 2022

From: Tax Foundation

Key Findings

  • In calendar year 2022, state-local tax burdens are estimated at 11.2 percent of national product.
  • Taxpayers remit taxes to both their home state and to other states, and about 20 percent of state tax revenue comes from nonresidents. Our tax burdens analysis accounts for this tax exporting.
  • New Yorkers faced the highest burden, with 15.9 percent of net product in the state going to state and local taxes. Connecticut (15.4 percent) and Hawaii (14.9 percent) followed close behind.
  • On the other end of the spectrum, Alaska (4.6 percent), Wyoming (7.5 percent), and Tennessee (7.6 percent) had the lowest burdens.
  • Tax burdens rose across the country as pandemic-era economic changes caused taxable income, activities, and property values to rise faster than net national product. Tax burdens in 2020, 2021, and 2022 are all higher than in any other year since 1978.
  • State-local tax burdens are often very close to one another and slight changes in taxes or income can translate to seemingly dramatic shifts in rank. For example, Oklahoma (10th) and Ohio (24th) only differ in burden by just over one percentage point. However, while burdens are clustered in the center of the distribution, states at the top and bottom can have substantially different burden percentages.

Total tax burden by state 2022 state and local tax burdens (2022 state and local taxes)

Table 1. State-Local Tax Burdens by State, Calendar Year 2022
State Effective Tax Rate Rank
Alabama 9.8% 20
Alaska 4.6% 1
Arizona 9.5% 15
Arkansas 10.2% 26
California 13.5% 46
Colorado 9.7% 19
Connecticut 15.4% 49
Delaware 12.4% 42
District of Columbia 12.0% (39)
Florida 9.1% 11
Georgia 8.9% 8
Hawaii 14.1% 48
Idaho 10.7% 29
Illinois 12.9% 44
Indiana 9.3% 14
Iowa 11.2% 34
Kansas 11.2% 33
Kentucky 9.6% 17
Louisiana 9.1% 12
Maine 12.4% 41
Maryland 11.3% 35
Massachusetts 11.5% 37
Michigan 8.6% 5
Minnesota 12.1% 39
Mississippi 9.8% 21
Missouri 9.3% 13
Montana 10.5% 27
Nebraska 11.5% 38
Nevada 9.6% 18
New Hampshire 9.6% 16
New Jersey 13.2% 45
New Mexico 10.2% 25
New York 15.9% 50
North Carolina 9.9% 23
North Dakota 8.8% 7
Ohio 10.0% 24
Oklahoma 9.0% 10
Oregon 10.8% 31
Pennsylvania 10.6% 28
Rhode Island 11.4% 36
South Carolina 8.9% 9
South Dakota 8.4% 4
Tennessee 7.6% 3
Texas 8.6% 6
Utah 12.1% 40
Vermont 13.6% 47
Virginia 12.5% 43
Washington 10.7% 30
West Virginia 9.8% 22
Wisconsin 10.9% 32
Wyoming 7.5% 2

What Are Tax Burdens?

In this study, we define a state’s tax burden as state and local taxes paid by a state’s residents divided by that state’s share of net national product. This study’s contribution to our understanding of true tax burdens is its focus on the fact that each of us not only pays state and local taxes to our own places of residence, but also to the governments of states and localities in which we do not live.

This tax shifting across state borders arises from several factors, including our movement across state lines during work and leisure time and the interconnectedness of the national economy. The largest driver of this phenomenon, however, is the reality that the ultimate incidence of a tax frequently falls on entities other than those that write the check to the government.

What is Tax Incidence?

The incidence of a tax is a measure of which entity pays the tax. But there are two very different types of tax incidence: legal incidence and economic incidence.

The legal incidence of taxes is borne by those with the legal obligation to remit tax payments to state and local governments. Legal incidence is established by law and tells us which individuals or companies must physically send tax payments to state and local treasuries.

The legal incidence of taxes is generally very different from the final economic burden. Because taxes influence the relative prices facing individuals, they lead to changes in individual behavior. These tax-induced changes in behavior cause some portion (or all) of the economic burden of taxes to be shifted from those bearing the legal incidence onto others in society. For example, the legal incidence of corporate income taxes typically falls on companies. But economists agree that some portion of these taxes is shifted forward to others, in the form of higher prices for consumers, lower wages for workers, reduced returns to shareholders, or some combination of the three.

Once these tax-induced changes in behavior throughout the economy are accounted for, the final distribution of the economic burden of taxes is called the economic incidence. This measure is also referred to as the tax burden faced by individuals in their roles as consumers, workers, and investors.

What is Tax Exporting?

Beyond the fact that tax burdens often ultimately borne by many people who do not directly remit them, taxes imposed by state and local governments are often borne—in both their legal and economic incidence—by nonresidents. When some share of the burden of a tax imposed in one state is borne by those who live elsewhere, this phenomenon is known as tax exporting.

Tax Exporting is the Shifting of Tax Burdens Across State Lines Total Combined State and Local Tax Collections by Taxpayer Type (2022)

Alaska provides good examples of tax exporting. Sixty percent of Alaska’s state and local tax collections came from residents of other states in 2022. The main driver is state taxes on oil extraction (severance taxes and taxes on oil production and pipeline property). The burden of Alaska’s oil taxes does not fall predominantly on Alaska residents. Ignoring this fact and comparing Alaska tax collections directly to Alaska income makes the tax burden of Alaska residents look much higher than it actually is.

This study assumes that much of the economic burden of severance taxes falls on oil industry investors rather than on Alaska taxpayers. Notably, this study does not assume that the burden substantially falls on consumers (including drivers who purchase motor fuel), since these prices are set by global energy markets. The same is true for states like North Dakota and Wyoming where, once this allocation is made, the aggregate tax burden falls from among the nation’s highest to the lowest.

Resource-rich states such as these are only some of the more extreme examples of tax exporting. Major tourist destinations like Florida and Nevada are able to tax tourists, who are most often nonresidents, in addition to exporting many tax costs to investors. Some states have large numbers of residents employed out of state who pay individual income taxes to the states in which they work. When a metropolitan area attracts workers from nearby states, a large portion of wage income in a state can be earned by border-crossing commuters. On the other hand, some states have reciprocity agreements in which they tax their own residents, regardless of where they work. This study accounts for these types of agreements.

Every state’s economic activity is different, as is every state’s tax code. As a result, each varies in its ability to export its tax burden. Economists have been studying this phenomenon since at least the 1960s when Charles McLure estimated that states were extracting between 15 and 35 percent of their tax revenue from nonresidents.[1]

Much of this interstate tax collecting occurs through no special effort by state and local legislators or tax collectors. Tourists spend as they travel and many of those transactions are taxed. People who own property out of state pay property taxes in those states. And the burden of business taxes is borne by the employees, shareholders, and customers of those businesses wherever they may live. In many states, however, lawmakers have made a conscious effort to levy taxes specifically on nonresidents. Common examples include tax increases on hotel rooms, rental cars, and restaurant meals, and local sales taxes in resort areas.

What Is the Difference between Tax Burdens and Tax Collections?

The distinction between tax burdens and tax collections is crucial to understanding tax shifting across state lines. Because tax collections represent a tally of tax payments made to state and local governments, they measure legal incidence only. In contrast, our tax burdens estimates allocate taxes to states that are economically affected by them. As a result, the estimates in this report attempt to measure the economic incidence of taxes, not the legal incidence.

Tax collections are useful for some purposes and cited frequently. However, dividing total taxes collected by governments in a state by the state’s total income is not an accurate measure of the tax burden on a state’s residents as a whole because it does not accurately reflect the taxes that are actually paid out of that state’s income.

The authoritative source for state and local tax collections data is the Census Bureau’s State and Local Government Finance division, which serves as the main input and starting point for our tax burdens model. Here are a few additional examples of the difference between tax collections (tallied by the Census Bureau) and our tax burdens estimates:

  • When Connecticut residents work in New York City and pay income tax to both New York State and the city, the Census Bureau will count those amounts as New York tax collections, but we count them as part of the tax burden of Connecticut’s residents.
  • When Illinois and Massachusetts residents own second homes in nearby Wisconsin or Maine, respectively, local governments in Wisconsin and Maine will tally those property tax collections, but we shift those payments back to the states of the taxpayers.
  • When people all over the country vacation at Disney World or in Las Vegas, tax collectors will tally the receipts from lodging, rental car, restaurant, and general sales taxes in Florida and Nevada, but we allocate these taxes partially to the vacation-goers themselves, partly to labor, and partially to holders of capital across the country.

In addition to allocating the taxes cited above, this study also allocates taxes on corporate income, commercial and residential property, tourism, and nonresident personal income away from the state of collection to the state of the taxpayers’ residences.

Which Taxes Are Included in the Tax Burdens Estimates?

We include all taxes reported by the Census Bureau’s State and Local Government Finance division, the most comprehensive resource on state and local tax collections data and our tax burden model’s starting point. These taxes are:

  • Property taxes;
  • General sales taxes;
  • Excise taxes on alcoholic beverages, amusements, insurance premiums, motor fuels, pari-mutuels, public utilities, tobacco products, and other miscellaneous transactions;
  • License taxes on alcoholic beverages, amusements, general corporations, hunting and fishing, motor vehicles, motor vehicle operators, public utilities, occupations and businesses not classified elsewhere, and other miscellaneous licenses;
  • Individual income taxes;
  • Corporate income taxes;
  • Estate, inheritance, and gift taxes;
  • Documentary and transfer taxes;
  • Severance taxes;
  • Special assessments for property improvements; and
  • Miscellaneous taxes not classified in one of the above categories.

Our time unit of measure is the calendar year. Fiscal year data from states have been adjusted to match the calendar year. The state and local tax burden estimates for calendar year 2022 presented in this paper are based on the most recent data available from the Census Bureau, the Bureau of Economic Analysis, and all other data sources employed, and grossed up to the present based on the latest economic data.

Limitations

Tax burden measures are not measures of the size of government in a state, nor are they technically measures of the complete burden of taxation faced by a given state’s residents (this study excludes compliance costs and economic efficiency losses). Furthermore, the tax burden estimates presented here do not take into account the return to that taxation in the form of government spending. These drawbacks, however, are not unique to our tax burden estimates.

It is also worth noting that these tax burden estimates are not those of individual taxpayers. Our tax burden estimates look at the aggregate amount of state and local taxes paid, not the taxes paid by an individual. We collect data on the total income earned in a state (by all residents collectively) and estimate the share of that total that goes toward state and local taxes.

Calendar Year 2022 Results: Tax Burden by State

State-local tax burdens of each of the 50 states’ residents as a share of income are clustered quite close to one another. This is logical considering state and local governments fund similar activities such as public education, transportation, prison systems, and health programs, often under the same federal mandates. Furthermore, tax competition between states can often make dramatic differences in the level of taxation between similar, nearby states unsustainable in the long run.

Table 2. State-Local Tax Burdens by State (with Detailed Breakdown), Calendar Year 2022
State State-Local Effective Tax Rate Rank State-Local Tax Burden per Capita Taxes Paid to Own State per Capita Taxes Paid to Other States Per Capita
Alabama 9.80% 20 $4,585 $3,578 $1,007
Alaska 4.60% 1 $2,943 $1,527 $1,416
Arizona 9.50% 15 $5,156 $3,997 $1,159
Arkansas 10.20% 26 $5,031 $3,598 $1,433
California 13.50% 46 $10,167 $8,711 $1,457
Colorado 9.70% 19 $6,699 $5,010 $1,689
Connecticut 15.40% 49 $12,151 $9,883 $2,268
Delaware 12.40% 42 $7,170 $5,580 $1,591
District of Columbia 12.00% -39 $11,654 $9,060 $2,594
Florida 9.10% 11 $5,406 $3,533 $1,873
Georgia 8.90% 8 $4,862 $3,711 $1,151
Hawaii 14.10% 48 $8,410 $7,082 $1,328
Idaho 10.70% 29 $5,402 $4,140 $1,262
Illinois 12.90% 44 $8,390 $6,866 $1,523
Indiana 9.30% 14 $5,030 $3,965 $1,064
Iowa 11.20% 34 $6,086 $4,812 $1,274
Kansas 11.20% 33 $6,353 $4,971 $1,382
Kentucky 9.60% 17 $4,669 $3,679 $990
Louisiana 9.10% 12 $4,762 $3,705 $1,056
Maine 12.40% 41 $6,906 $5,712 $1,194
Maryland 11.30% 35 $7,680 $5,940 $1,740
Massachusetts 11.50% 37 $9,405 $7,565 $1,840
Michigan 8.60% 5 $4,720 $3,595 $1,125
Minnesota 12.10% 39 $7,763 $6,316 $1,448
Mississippi 9.80% 21 $4,220 $3,422 $798
Missouri 9.30% 13 $4,953 $3,666 $1,287
Montana 10.50% 27 $5,795 $4,200 $1,595
Nebraska 11.50% 38 $6,720 $5,327 $1,393
Nevada 9.60% 18 $5,554 $3,932 $1,622
New Hampshire 9.60% 16 $6,593 $4,784 $1,809
New Jersey 13.20% 45 $9,648 $7,696 $1,952
New Mexico 10.20% 25 $4,835 $3,859 $977
New York 15.90% 50 $12,083 $10,380 $1,702
North Carolina 9.90% 23 $5,299 $4,156 $1,143
North Dakota 8.80% 7 $5,403 $3,800 $1,603
Ohio 10.00% 24 $5,530 $4,380 $1,149
Oklahoma 9.00% 10 $4,527 $3,380 $1,148
Oregon 10.80% 31 $6,572 $5,191 $1,381
Pennsylvania 10.60% 28 $6,723 $5,354 $1,369
Rhode Island 11.40% 36 $6,948 $5,273 $1,675
South Carolina 8.90% 9 $4,596 $3,365 $1,231
South Dakota 8.40% 4 $5,196 $3,526 $1,670
Tennessee 7.60% 3 $4,036 $3,082 $954
Texas 8.60% 6 $4,994 $3,849 $1,146
Utah 12.10% 40 $6,750 $5,346 $1,404
Vermont 13.60% 47 $7,958 $6,532 $1,426
Virginia 12.50% 43 $7,979 $6,367 $1,612
Washington 10.70% 30 $7,803 $6,069 $1,734
West Virginia 9.80% 22 $4,479 $3,444 $1,034
Wisconsin 10.90% 32 $6,231 $4,911 $1,320
Wyoming 7.50% 2 $4,691 $2,647 $2,045

Since we present tax burdens as a share of income as a relative ranking of the 50 states, slight changes in taxes or income can translate into seemingly dramatic shifts in rank. For example, Oklahoma (10th) and Ohio (24th) only differ in burden by just over one percentage point. Tax revenue growth during the pandemic, however, has not only increased overall tax burdens but also expanded variance among states. In our last pre-pandemic analysis, the 20 middle-ranked states differed by less than a percentage point on effective rate, but in 2022, the difference between New Hampshire (16th) and Maryland (35th) is 1.8 percentage points. While burdens are clustered in the center of the distribution, states at the top and bottom can have substantially different burden percentages: the state with the highest burden, New York, has a burden percentage of 15.9 percent, while the state with the lowest burden, Alaska, has a burden percentage of 4.6 percent.

Nationwide, 20 percent of all state and local taxes are collected from nonresidents. As a result, the residents of all states pay surprisingly high shares of their total tax burdens to out-of-state governments. Table 2 lists the per capita dollar amounts of total tax burden and income that are divided to compute each state’s burden, as well as the breakdown of in-state and out-of-state payments for calendar year 2022.

The residents of three states stand above the rest, experiencing the highest state-local tax burdens in the country: New York (15.9 percent of state income), Connecticut (15.4 percent), and Hawaii (14.1 percent). By contrast, the median state-local tax burden is 10.2 percent, and the national average is 11.6 percent. Three states are at or below 8 percent: Alaska (4.6 percent), Wyoming (7.5 percent), and Tennessee (7.6 percent)

New York, Hawaii, and Connecticut have occupied the top three spots on the list since 2017, with California, Maryland, Minnesota, New Jersey, and Vermont typically vying for the next five spots—though not always in the same order. This may be partially attributed to high expenditure levels, which must be sustained by high levels of revenue. Furthermore, in the case of states like Connecticut and New Jersey, relatively high tax payments to out-of-state governments add to already high in-state payments, both due to direct interactions with neighboring states like New York and because these are high-income states whose residents experience high levels of capital gains. High levels of capital gains will result in residents paying an increased share of other states’ business taxes.[2] Finally, a substantial portion of Hawaii’s tax burden is generated by the tourism industry and substantially exported to the rest of the country.

The states with the highest state-local tax burdens in calendar year 2022 were:

1. New York (15.9 percent)
2. Connecticut (15.4 percent)
3. Hawaii (14.1 percent)
4. Vermont (13.6 percent)
5. California (13.5 percent)
6. New Jersey (13.2 percent)
7. Illinois (12.9 percent)
8. Virginia (12.5 percent)
9. Delaware (12.4 percent)
10. Maine (12.4 percent)

The states with the lowest state-local tax burdens in calendar year 2022 were:

50. Alaska (4.6 percent)
49. Wyoming (7.5 percent)
48. Tennessee (7.6 percent)
47. South Dakota (8.4 percent)
46. Michigan (8.6 percent)
45. Texas (8.6 percent)
44. North Dakota (8.8 percent)
43. Georgia (8.9 percent)
42. South Carolina (8.9 percent)
41. Oklahoma (9.0 percent)

Generally, there are three reasons why a state’s ranking could change from year to year. First, there could have been a change in total collections by the state, either due to policy changes or economic fluctuations. Second, there may have been a change in the level of state product due to changing economic conditions. And third, other states to which residents pay state and local taxes could have seen changes in tax collections (again due to changing policy or economic conditions).

Our current data are for tax year 2022, based on prior-year complete Census tax revenue data, quarterly tax data through the end of calendar year 2021, up-to-date national accounts data and economic forecasts, and adjustments for recently adopted tax policies. This represents the first time that Burdens has been presented as a current year estimate rather than an analysis of prior-year data.

The effects of the COVID-19 pandemic and of the economic changes of the past two years can be seen in our data. Net national product rose 13.6 percent in nominal terms between 2019 and 2022, while state and local tax collections rose 19.9 percent. High-income, high-tax states saw collections soar as the stock market first recovered and then boomed after an early 2020 dip, and across the country, behavioral changes induced by the pandemic increased the share of taxable activity, while federal aid to individuals and businesses further boosted taxable income and activity. A hot housing market, moreover, has begun to show up in property tax assessments. The result is tax collections increasing faster than income growth, yielding higher overall burdens in 2020-2022 despite more states cutting tax rates than raising them in recent years. For each of these years, effective tax rates stood at 11.2 percent of net national product, higher than all years in our series except the first two for which data are available, 1977 (11.7 percent) and 1978 (11.6 percent).

Table 3 lists each state’s burden as a share of income, including rankings, for the three most recent calendar years available.

Table 3. State-Local Tax Burdens as a Percentage of Net Product, 2020-2022
Burden Percentages and Rankings
2019 2020 2021 2022
State Rate Rank Rate Rank Rate Rank Rate Rank
U.S. Average 10.6% 11.2% 11.2% 11.2%
Alabama 9.1% 12 10.0% 18 10.0% 20 9.8% 20
Alaska 5.6% 1 5.0% 1 4.1% 1 4.6% 1
Arizona 9.4% 18 9.8% 15 9.6% 16 9.5% 15
Arkansas 10.3% 28 10.9% 29 10.7% 26 10.2% 26
California 12.2% 46 12.9% 47 13.3% 46 13.5% 46
Colorado 9.6% 22 10.1% 19 10.0% 21 9.7% 19
Connecticut 12.5% 48 13.7% 48 14.7% 49 15.4% 49
Delaware 11.3% 39 12.2% 40 12.2% 40 12.4% 42
District of Columbia 11.0% (37) 11.6% (34) 11.7% (36) 12.0% (39)
Florida 8.9% 8 9.2% 5 9.1% 9 9.1% 11
Georgia 9.0% 9 9.4% 9 9.1% 10 8.9% 8
Hawaii 13.2% 49 13.7% 49 13.9% 48 14.1% 48
Idaho 9.5% 19 10.2% 23 10.8% 29 10.7% 29
Illinois 11.2% 38 12.5% 42 12.9% 44 12.9% 44
Indiana 9.0% 10 9.3% 6 9.3% 12 9.3% 14
Iowa 11.0% 37 11.8% 35 11.5% 35 11.2% 34
Kansas 10.2% 26 10.8% 27 11.1% 31 11.2% 33
Kentucky 9.8% 23 10.2% 21 10.0% 19 9.6% 17
Louisiana 8.9% 7 9.3% 8 9.1% 11 9.1% 12
Maine 11.6% 41 12.1% 39 12.4% 42 12.4% 41
Maryland 11.9% 43 12.6% 43 11.9% 38 11.3% 35
Massachusetts 10.8% 34 11.4% 30 11.4% 34 11.5% 37
Michigan 9.6% 20 9.6% 12 9.0% 7 8.6% 5
Minnesota 12.3% 47 12.7% 44 12.4% 43 12.1% 39
Mississippi 9.4% 16 9.8% 14 9.8% 17 9.8% 21
Missouri 9.0% 11 9.5% 11 9.4% 14 9.3% 13
Montana 10.2% 27 10.8% 26 10.7% 27 10.5% 27
Nebraska 10.8% 33 11.7% 34 11.7% 37 11.5% 38
Nevada 9.4% 17 10.2% 22 9.9% 18 9.6% 18
New Hampshire 9.2% 15 9.4% 10 9.5% 15 9.6% 16
New Jersey 11.9% 44 12.8% 45 13.0% 45 13.2% 45
New Mexico 10.5% 30 11.6% 32 10.5% 25 10.2% 25
New York 14.2% 50 14.9% 50 15.2% 50 15.9% 50
North Carolina 9.6% 21 10.1% 20 10.1% 23 9.9% 23
North Dakota 9.2% 14 9.9% 16 7.9% 3 8.8% 7
Ohio 10.1% 25 10.6% 24 10.4% 24 10.0% 24
Oklahoma 8.8% 6 9.6% 13 9.0% 8 9.0% 10
Oregon 11.7% 42 11.9% 37 11.1% 32 10.8% 31
Pennsylvania 10.4% 29 10.8% 28 10.7% 28 10.6% 28
Rhode Island 11.4% 40 12.0% 38 11.7% 36 11.4% 36
South Carolina 9.2% 13 9.9% 17 9.4% 13 8.9% 9
South Dakota 8.6% 5 8.8% 4 8.7% 6 8.4% 4
Tennessee 6.9% 2 7.6% 2 7.7% 2 7.6% 3
Texas 8.4% 4 8.7% 3 8.4% 5 8.6% 6
Utah 10.9% 36 11.8% 36 11.9% 39 12.1% 40
Vermont 12.0% 45 12.8% 46 13.4% 47 13.6% 47
Virginia 10.9% 35 12.4% 41 12.4% 41 12.5% 43
Washington 10.6% 31 11.4% 31 11.0% 30 10.7% 30
West Virginia 10.0% 24 10.7% 25 10.1% 22 9.8% 22
Wisconsin 10.8% 32 11.6% 33 11.3% 33 10.9% 32
Wyoming 7.9% 3 9.3% 7 8.3% 4 7.5% 2

Many of the least-burdened states forgo a major tax. For example, Alaska (1st), Wyoming (2nd), Tennessee (3rd), South Dakota (4th), Texas (6th), and Florida (11th) all do without taxes on individual income. Similarly, Wyoming and South Dakota do without a major business tax, and Alaska has no state-level sales tax (though it does allow local governments to levy sales taxes). Notably, opting to not levy a personal income tax causes a state to rely more on other forms of taxation that might be more exportable.

Not every state with a significant amount of nonresident income uses it to lighten the tax load of its own residents. Maine and Vermont have the largest shares of vacation homes in the country,[3] and they collect a sizeable fraction of their property tax revenue on those properties, mostly from residents of Connecticut, Massachusetts, and other New England states. Despite this, Maine and Vermont still rank 41st and 47th, respectively, in this study.

Despite the importance of nonresident collections and the increasing efforts to boost them, the driving force behind a state’s long-term rise or fall in the tax burden rankings is usually internal and most often a result of deliberate policy choices regarding tax and spending levels or changes in state income levels. This study is not an endorsement of policies that attempt to export tax burdens. From the perspectives of the economy and political efficiency, states can create myriad problems when they purposefully shift tax burdens to residents of other jurisdictions. This study only attempts to quantify the amount of shifting that occurs and understand how it affects the distribution of state and local tax burdens across states.

Nationally, average state-local tax burdens as a share of income have fallen slightly from 11.7 percent in 1977 to 11.2 percent in 2022, as the pandemic-era economy has yielded an increase in tax burdens to the highest level in decades. Chart 2 shows the movement of U.S. average state-local tax burdens since 1977.

Total State-Local Tax Burden as a Percentage of Net Product U.S. Average (1977-2022)

Some states’ residents are paying the same share of their income to taxes now as they were three decades ago, but in other states, tax burdens have changed substantially over time. The tax burden in every state fluctuates as years pass for a variety of reasons, including changes in tax law, state economies, and population. Further, changes outside of a state can impact tax burdens as well. See Table 4 for historical trends in burdens by state (selected years).

Table 4. State-Local Tax Burdens as a Percentage of State Income by State, Selected Years
State 1977 1980 1990 2000 2010 2015 2019 2020 2021 2022
U.S. Average 11.7% 10.4% 10.7% 9.7% 10.6% 10.3% 10.6% 11.2% 11.2% 11.2%
Alabama 10.1% 9.3% 9.5% 8.8% 9.2% 8.7% 9.1% 10.0% 10.0% 9.8%
Alaska 12.7% 8.9% 6.1% 5.1% 7.2% 5.8% 5.6% 5.0% 4.1% 4.6%
Arizona 11.7% 10.2% 10.7% 8.9% 9.2% 8.9% 9.4% 9.8% 9.6% 9.5%
Arkansas 9.4% 9.2% 9.3% 9.4% 10.8% 10.4% 10.3% 10.9% 10.7% 10.2%
California 13.3% 11.4% 11.3% 10.7% 12.0% 11.4% 12.2% 12.9% 13.3% 13.5%
Colorado 11.6% 10.0% 10.4% 8.9% 9.5% 9.4% 9.6% 10.1% 10.0% 9.7%
Connecticut 12.1% 10.5% 11.1% 11.3% 12.9% 11.9% 12.5% 13.7% 14.7% 15.4%
Delaware 10.9% 10.3% 9.2% 8.6% 9.7% 9.7% 11.3% 12.2% 12.2% 12.4%
District of Columbia 13.4% 13.8% 12.9% 11.5% 9.8% 10.1% 11.0% 11.6% 11.7% 12.0%
Florida 10.2% 8.7% 9.2% 8.6% 10.0% 9.0% 8.9% 9.2% 9.1% 9.1%
Georgia 10.5% 9.9% 10.5% 9.3% 9.5% 9.0% 9.0% 9.4% 9.1% 8.9%
Hawaii 11.6% 11.0% 10.6% 9.9% 10.8% 12.1% 13.2% 13.7% 13.9% 14.1%
Idaho 11.7% 10.5% 11.0% 10.2% 10.0% 9.7% 9.5% 10.2% 10.8% 10.7%
Illinois 11.5% 10.6% 10.6% 9.4% 10.9% 11.0% 11.2% 12.5% 12.9% 12.9%
Indiana 9.4% 8.3% 9.5% 8.4% 9.9% 8.9% 9.0% 9.3% 9.3% 9.3%
Iowa 11.5% 10.7% 11.0% 9.5% 10.0% 10.3% 11.0% 11.8% 11.5% 11.2%
Kansas 10.6% 9.6% 10.3% 9.6% 10.1% 9.1% 10.2% 10.8% 11.1% 11.2%
Kentucky 10.7% 9.8% 10.3% 10.0% 9.7% 9.7% 9.8% 10.2% 10.0% 9.6%
Louisiana 8.6% 8.0% 8.5% 8.4% 8.2% 8.4% 8.9% 9.3% 9.1% 9.1%
Maine 11.4% 10.9% 11.5% 10.9% 10.9% 11.2% 11.6% 12.1% 12.4% 12.4%
Maryland 12.6% 11.6% 11.6% 10.6% 10.9% 11.5% 11.9% 12.6% 11.9% 11.3%
Massachusetts 13.4% 12.1% 11.4% 10.0% 10.9% 10.7% 10.8% 11.4% 11.4% 11.5%
Michigan 11.7% 10.6% 10.6% 9.6% 10.2% 9.8% 9.6% 9.6% 9.0% 8.6%
Minnesota 12.3% 10.9% 11.5% 10.3% 11.3% 11.9% 12.3% 12.7% 12.4% 12.1%
Mississippi 10.5% 9.4% 9.5% 9.1% 9.3% 9.4% 9.4% 9.8% 9.8% 9.8%
Missouri 10.3% 9.4% 9.9% 9.3% 9.5% 9.0% 9.0% 9.5% 9.4% 9.3%
Montana 10.8% 9.6% 10.0% 8.9% 9.5% 10.1% 10.2% 10.8% 10.7% 10.5%
Nebraska 12.1% 10.8% 10.3% 9.6% 10.2% 10.1% 10.8% 11.7% 11.7% 11.5%
Nevada 9.4% 7.8% 8.2% 7.2% 8.8% 9.4% 9.4% 10.2% 9.9% 9.6%
New Hampshire 9.9% 8.5% 8.6% 7.7% 8.8% 9.8% 9.2% 9.4% 9.5% 9.6%
New Jersey 13.9% 12.1% 11.9% 11.0% 13.0% 11.5% 11.9% 12.8% 13.0% 13.2%
New Mexico 10.1% 9.3% 10.8% 9.9% 9.1% 9.3% 10.5% 11.6% 10.5% 10.2%
New York 14.7% 13.2% 13.1% 11.7% 13.2% 14.5% 14.2% 14.9% 15.2% 15.9%
North Carolina 10.9% 10.2% 10.5% 9.7% 10.5% 9.8% 9.6% 10.1% 10.1% 9.9%
North Dakota 13.0% 10.8% 10.4% 9.4% 9.5% 9.7% 9.2% 9.9% 7.9% 8.8%
Ohio 9.9% 9.2% 10.5% 10.2% 10.2% 10.1% 10.1% 10.6% 10.4% 10.0%
Oklahoma 9.7% 8.7% 10.0% 9.7% 9.3% 8.2% 8.8% 9.6% 9.0% 9.0%
Oregon 12.4% 11.2% 11.8% 10.1% 10.9% 11.2% 11.7% 11.9% 11.1% 10.8%
Pennsylvania 11.5% 10.7% 10.6% 9.9% 10.6% 10.1% 10.4% 10.8% 10.7% 10.6%
Rhode Island 12.7% 11.6% 11.4% 11.1% 11.4% 11.2% 11.4% 12.0% 11.7% 11.4%
South Carolina 10.3% 9.7% 10.2% 9.1% 8.8% 9.0% 9.2% 9.9% 9.4% 8.9%
South Dakota 10.1% 8.9% 8.3% 7.2% 7.9% 8.7% 8.6% 8.8% 8.7% 8.4%
Tennessee 9.1% 8.0% 8.1% 7.0% 7.9% 7.2% 6.9% 7.6% 7.7% 7.6%
Texas 8.9% 7.7% 8.7% 7.5% 8.4% 8.2% 8.4% 8.7% 8.4% 8.6%
Utah 11.7% 11.1% 11.2% 10.4% 10.0% 9.6% 10.9% 11.8% 11.9% 12.1%
Vermont 13.0% 10.8% 11.1% 10.1% 10.8% 11.7% 12.0% 12.8% 13.4% 13.6%
Virginia 11.4% 10.4% 10.5% 9.8% 10.0% 9.7% 10.9% 12.4% 12.4% 12.5%
Washington 10.8% 9.6% 10.1% 8.6% 9.9% 9.9% 10.6% 11.4% 11.0% 10.7%
West Virginia 10.8% 10.2% 10.0% 9.7% 10.5% 9.8% 10.0% 10.7% 10.1% 9.8%
Wisconsin 14.1% 12.2% 12.3% 11.5% 11.7% 10.5% 10.8% 11.6% 11.3% 10.9%
Wyoming 9.0% 7.9% 6.9% 6.7% 8.3% 8.8% 7.9% 9.3% 8.3% 7.5%

States Where the Tax Burden Has Changed Dramatically Over Time

Among states with declining tax burdens, Alaska is the extreme example. Before the Trans-Alaska Pipeline system was finished in 1977, taxpayers in Alaska paid 11.7 percent of their share of net national product in state and local taxes. By 1980, with oil tax revenue pouring in, Alaska repealed its personal income tax and started sending out checks to residents instead. The tax burden plummeted, and now Alaskans are the least taxed with a burden of only 4.6 percent of income.

Similarly, North Dakota’s burden has fallen from 13.0 percent in 1977 to 8.8 percent of net state product in 2022.

Although the majority of states have seen a decrease in tax burdens over time, 16 have experienced increases since 1977, many of these likely to be temporary upticks due to the pandemic. Connecticut taxpayers have seen the largest increase, of 3.3 percentage points, followed by Hawaii at 2.5 percent.

Conclusion

When measuring the burden imposed on a given state’s residents by all state and local taxes, one cannot look exclusively to collections figures for the governments located within state borders. A significant amount of tax shifting takes place across state lines, and this shifting is not uniform. Furthermore, this shifting should not be ignored when attempting to understand the burden faced by taxpayers within a state.

Bipartisan bill would cut realty transfer tax by 25%

From: Town Square Live 

A bill introduced into the state House of Representatives would cut by 25% the taxes paid because of the sale of a home.

Introduced by Rep. Bill Bush, D-Dover, House Bill 358 would make law of something Rep. Mike Ramone, R-Pike Creek South, has been preaching for years: reducing the cost of Delaware’s real estate transfer tax after it was increased during financially difficult years.

The realty transfer tax is levied on the purchase price of the home and is usually split between the buyer and seller, unless otherwise negotiated.

“Right now, in most cases, Delaware has a functional realty transfer tax of 4%,” said Rep. Kevin Hensley, R-Townsend, who works in the real estate field. “Typically, this cost is split between buyer and seller. However, in the current competitive housing market, prospective buyers are often paying the entire tax to convince sellers to accept their offers.”

In 2017, Delaware’s realty transfer tax was effectively raised from 3% to the present level of 4%. The move was made as part of a revenue-generating package to bridge a major budget gap.

“This realty transfer tax hike was supposed to expire two years after it was imposed, and that was three years ago,” Ramone said.

A member of the budget-writing Joint Finance Committee, he is one of the sponsors of House Bill 358.

The move to cut the tax comes after two years of raging sales in the housing market, leading to tax windfalls for state and local governments. The market is also facing rises in interest rates with the Federal Reserve saying it will hike the base borrowing rates several times, partly to slow inflation in an overheated economy.

That has some real estate experts expecting a slow down in sales, partly because of the lack of new housing.

The revenue from the 4% realty transfer tax is split between state and local governments.

The state currently gets 62.5% of the proceeds, with the local presiding government collecting the remaining 37.5%.

The new bipartisan bill would reverse the state’s 2017 tax hike, restoring the effective combined realty transfer tax to 3%.

Under the measure, only the state’s share of the revenue would be impacted. The revenue flowing to local governments from home sales would be unchanged.

“Our high realty transfer tax is impacting two groups that can least afford it – millennials and seniors,” Ramone said. “If we can do something to both facilitate homeownership among young people while giving our older citizens a less costly opportunity to gracefully transition into their golden years, I think we have an obligation to do it.”

According to Long & Foster Real Estate, the median price of a home sold in Delaware as of February was $335,000.

HB 358 would reduce the transaction cost for the sale of such a home by almost $3,400.

Based on the latest estimates from the Delaware Economic and Financial Advisory Council, HB 358 would allow homebuyers and sellers to collectively retain more than $100 million annually.

Ramone stressed that he believes the tax cut is both responsible and sustainable. Delaware’s surplus revenue is expected to exceed $1 billion for the second consecutive year.

So far 13 Democrats and 15 Republicans are sponsoring or co-sponsoring the measure.

The legislation is pending action in the House Administration Committee.

If enacted, the tax cut would take effect July 1.

Delaware’s Regulations, A Barrier to Business

From: Kathleen Rutherford, Executive Director, A Better Delaware

Delaware businesses and workers are subject to some of the most stringent regulations in the nation, leading to slower economic growth, less competition, and higher costs. The result is that companies able to afford regulatory compliance are often large corporations — a barrier to entry for Delaware’s small businesses.

According to a Feb. 2022 study by the Mercatus Center at George Mason University, Delaware has 95,976 regulatory restrictions on the books, ranking 30th in the United States overall.

When considered proportionally to the state’s workforce, however, Delaware ranks first in the nation for most regulations per capita. According to a 2019 study from the Mercatus Center, Delaware far exceeds other states with 11 words of regulatory language per Delaware worker.

In fact, the Center found that it would take 374 hours to read the entire Delaware Administrative Code.

Given those statistics, it’s no wonder that the CATO Institute cited Delaware’s expanding regulatory code as one reason the state has fallen from the top of economic freedom indexes.

“Delaware has lost tremendous ground during the past 20 years,” a CATO Institute analysis says. “It now ranks in or near the bottom third on all three dimensions of freedom, earning its 44th place by all-around poor performance.”

One area of particular concern is the over-regulation of occupational licensing, wherein trained professionals are required to get permission slips from the state to begin working.

A 2015 report published by the Obama administration warned that the current licensing regime in the United States creates substantial costs, and often the requirements for obtaining a license are not in sync with the skills needed for the job.

“There is evidence that licensing requirements raise the price of goods and services, restrict employment opportunities, and make it more difficult for workers to take their skills across State lines,” the Treasury Department report says. “Too often, policymakers do not carefully weigh these costs and benefits when making decisions about whether or how to regulate a profession through licensing. In some cases, alternative forms of occupational regulation, such as state certification, may offer a better balance between consumer protections and flexibility for workers.”

The report further found that more than 25 percent of workers in the United States require a license to do their jobs, with most workers licensed by the states. That’s a five-fold increase since the 1950s.

Delaware is no exception. According to a 2018 Institute for Justice study on the economic costs of occupational licensing, 15.15% of workers in Delaware are required to be licensed by the state and 8.73% are required to have additional certification.

While licensing requirements do, in some cases, offer health and safety protections to consumers and employees, many regulations simply hold small businesses down and prevent upward mobility for trained workers.

So, what can Delaware do to expand economic freedom and unleash workers from burdensome and unnecessary regulations?

One might look to a proposal in Tennessee, where a whopping 30% of workers require licenses to enter the profession of their choice, collectively costing them $279 million annually in new licenses and $38 million in license renewals.

There, the Beacon Center of Tennessee proposed a four-step plan to reduce the regulations’ drag on the state’s economy:

  1. Occupational licensing should be curtailed or eliminated on low-income professions.
  2. Tennessee should eliminate occupational licensing for professions with no measurable and realistic threat to consumer safety.
  3. Policymakers should strictly control the extension of occupational licensing to new professions
  4. Improve public access to data on licensed occupations so researchers can better measure the costs and burdens of licensure and how many Tennesseans

These common-sense steps would work as well in Delaware as they would in Tennessee and would do nothing to eliminate licensure requirements that legitimately protect the health and safety of consumers and workers.