Virginia’s Lopsided Tax Burden

A commonly used measure of the tax burden is the average tax revenue a state and its localities collect per resident. But that’s not the same as the amount of taxes that residents actually pay. How can that be?

Mark Robyn with the Tax Foundation provides the explanation in a new analysis: “Some states have special sources of revenue, such as oil taxes and large tourist industries, which are easily exported to residents of other states. Also, some taxes are naturally exported through no effort of state lawmakers. For instance, since the burden of corporate taxes ultimately falls upon customers, shareholders and employees, who are all located in many different states, the burden of taxes on corporations is naturally exported.”

“It turns out a quarter of the average taxpayer’s tax burden originates in states where he or she doesn’t reside.” Thus, Alaska ranks No. 1 nationally in “taxes collected” as a percentage of residents’ income (21%) but 50 in terms of “taxes paid” by residents (6.3%) thanks to its taxes on the petroleum industry.

How does Virginia stand? We’re in the opposite situation from Alaska — apparently, Virginians “export” very few of their taxes. Viewed by conventional measures, we are a low tax state. Using 2009 numbers, we rank No. 45 in state taxes collected as a percentage of residents’ income (8.9%). But we are a moderate/low-tax state, ranking 33, when measured by taxes paid by residents as a percentage of their income (9.1%).

Virginia is one of only eight states (by my quick eyeball count) in which taxes paid per resident exceeds taxes collected. Other states have figured out something that we haven’t. At least we can be thankful we aren’t New Jersey whose “taxes collected” rank it as the 7th highest-tax state but “taxes paid” ranks it the No. 1 most highly taxed state in the country.

The implication of this analysis is that Virginians are shouldering the burden of their own state-local taxes — and chipping in, through what they spend on gasoline, tourism and goods and services produced by out-of-state corporations, significant sums to other states. Maybe Gov. Bob McDonnell’s idea to put Interstate polling booths on the state line isn’t such a bad idea after all! (Actually it is an atrocious idea, but for other reasons. It would stick out-of-staters with a bigger share of the cost of running Virginia state government.)

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