No Surprise: Virginia Still a Relatively Low Tax State

Virginia has the 41st lowest tax burden in the country, according to the Tax Foundation, a nonprofit fiscal policy research group. The Foundation ranked the 50 states plus Washington, D.C., on the state/local tax burden as a percentage of pe capita income. Virginia’s average tax load of $4,056 amounted to 9.5 percent of income. (See the CNN article and chart.)

Virginians get to keep a lot more of their income than the residents of Maine, who pay 13.5 percent of their income to state/local government. Virginians also keep more of their money than their neighbors, North Carolina (10.5 percent, ranking 23; and Maryland, 10.7 percent, ranking 19.)

What the Tax Foundation doesn’t do, but someone should, is run a regression analysis to ascertain how much of the variation in the growth of per capita income is tied to the level of taxes in that state. As a mathematical dunce, I don’t know how to do that. But if someone could show me how, I’d run the numbers.

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15 responses to “No Surprise: Virginia Still a Relatively Low Tax State”

  1. Toomanytaxes Avatar

    I’d like to see this disaggregated by local jurisdiction. I strongly suspect that there are significant differences between the percentages of state and local taxes paid by residents of places such as Arlington, Fairfax, Alexandria, Loudoun and the rural Virginia.

  2. Jim Bacon Avatar

    TMT, I would like to see the data disaggregated, too. The results may be surprising. If RoVa (Rest of Virginia) follows the pattern of North Carolina, which it resembles demographically and socio-economically, the per capita tax burden actually might be higher than NoVa. But there’s just no way of knowing until we see the data.

  3. Larry Gross Avatar
    Larry Gross

    In the FWIW (for what it is worth) column – I agree.

    A GREAT service would be done by Bacon’s Rebellion to pry some of these relevant numbers out of those “wonky” nooks and crannies.. and into the fully-lighted environs of this Blog.

    That’s the challenge and that’s one of the potential big benefits of BLOGs like Bacon’s Rebellion…… how many “attaboys” are needed to go forward?


  4. Ray Hyde Avatar

    It might be interesting to compare those states as to population density and miles of roads maintained. It might not be surprising that Maine, for example has a higher cost per resident.

    Then check out the gross state product per capita. If the state provides enough help, it is probably easier for the individuals to earn more money, even if some of that money reverts in the form of higher taxes.

  5. Toomanytaxes Avatar

    Another interesting set of data would be to measure the rates of increase in taxes to the rates of increase in income.

  6. Anonymous Avatar

    Running regressions is a great idea but there is more to it than many realize. Very few academic studies have been able to show solid links between tax rates and economic growth or GSP etc…

    For the results to stand statistically, you need to have controlled for any and all
    other variables that might affect GSP and that is the harder part.

    Getting accurate business investment data and technology statistics is difficult and these are the two largest theoretical drivers of economic growth.

    If you just run a regression of GSP on taxes, you might as well just plot the graph of the figures and if it is down sloping โ€“ that will show that higher taxes lead to lower growth or GSP levels โ€“ whichever you want. But the result is no good โ€“ statistically or scientifically etcโ€ฆ.

    One can show that the number of brooms in the closet is positively related to income as wellโ€ฆ… but what does that prove?

    Common sense is a good guide here. Taxes that are used for productive ends such as education, roads, technology etc…will lead to growth and taxes which are used unproductively will not cause growth.

    Good regressions would likely show that this is true.

  7. Toomanytaxes Avatar

    12:51 Interesting and thoughtful comments. However, I would think that we would need to go further. Taxes can be spent on education or transporation and still not provide strong benefits to the public.

    For example, Fairfax County schools have at least 200 “Curriculum Specialists.” IMO, I suspect that putting 75% of these funds into extra reading teachers would go much further to produce gains for society in general. Similarly, the major flaws in both VDOT and the CTB identified by the state auditor strongly suggest that many of our transportation tax dollars are not producing good returns on investment.

    We need to measure everything in government. While I would never just want to look at numbers alone, not looking at any numbers at all is likely to waste tax dollars.

  8. Larry Gross Avatar
    Larry Gross

    I know this is going to sound dumb but doesn’t money “spend” the same way no matter whether the spender is the government purchasing..say computers..
    verses – .. the guy whoses taxes were collected to pay for that govt computer opposed to the guy keeping his taxes and buying a computer for himself instead?

    Taxes paid to governmnent paperpushers whose primary product is “paper” take that money home and buy an SUV with it – right?

    Taxes don’t go down a black hole and disappear – never to emerge. Most of them evenutally get spent on goods and services – that.. in turn generate profits and jobs … right?

    Bush and the no-taxers keep saying that they trust individuals to better spend that money.. than the government.

    Really… ???

    What if.. we gave taxes back that was spent on schools … roads… etc.. and folks get to spend it on .. say game boys ands Cadillac SUVs… instead.

    Is that “more productive” than taking their taxes and spending it on schools?

    Excuse my ignorance on this …

  9. James Atticus Bowden Avatar
    James Atticus Bowden

    Larry, I’ll answer your comment on my way to speak to Anon on regressions.

    The pass through for government spending on services and products is about 23 cents on the dollar. That is because a lot of money is spent on labor – bureaucrats – that approve the expense, etc. but don’t produce anything.

    In other words, if you decide to buy a computer, the time-labor cost of your decision may be about Zero, unless you moan about it all day and don’t work. The decision in VDOT, to pick an agency, may involve 5 people and 5 man-hours (I am making up the numbers on this…to show more than one person ‘s involvement) with a ladder of rising labor rates for the 5 bureaucrats. That costs the taxpayers time/money but nothing comes from it except the decision to buy a new computer.

    The dollar that goes into the economy multiplies to become 4 or 5 – in the private sector over time.

    It’s been years since I taught multi-variate regression analysis (we used SPSS, so that dates it) at the college level and years since I did one. The econometric modeling you do (I never did, but admire those in the department who could) is more than regression analysis.

    But, it is clear in economics that dollars removed from the economy for government reduce the dollars available – and that kills jobs. The old rule of thumb was every $150 million in taxes kills 5k jobs. The lowest paid, marginally employed persons go first.

  10. Ray Hyde Avatar

    “For the results to stand statistically, you need to have controlled for any and all
    other variables that might affect GSP and that is the harder part.”

    Thank you, Anon.

    That is the thing I have been trying to say about human settlement patterns. You would have to control for any and all other variables before you could show that the premise some sttelement patterns are more efficient than others is true.

    Practically speaking it is impossible to do that.

  11. Larry Gross Avatar
    Larry Gross

    re: “The old rule of thumb was every $150 million in taxes kills 5k jobs. The lowest paid, marginally employed persons go first.”

    Can that be proven by this regression-type stuff?


    I guess this means that Virginia should have one of the highest Gross Products of the 50 states?

    naw.. I know that’s not true..

    How about 3rd world places? I bet they have even lower taxes.. and so should easily beat places like Va in economic output right?

    naw.. that don’t sound right either..

    economics was never my strong suite..


  12. James Atticus Bowden Avatar
    James Atticus Bowden

    Larry: How about 3rd World countries. Interesting that you mention that.

    Take the GNP and divide by population for per capita wealth (not real distributed income). Then you take the current GNP of any country in the 3rd World and straight line extrapolate the likely and max growth in capital you get two numbers. Then draw the exponential growth in population and divide the two possible GNPs by the population. You will be horrified to see the drop in per capita wealth.

    That is why about 5 billion people want to live in the USA. More will in years to come.

    After you figure out how little capital there is in a country, then you can deduct the legal taxes and the illegal taxes of graft and corruption and the theft from public funds and businesses to see how many jobs are lost.

  13. Ray Hyde Avatar

    I think JAB is mostly correct. His example about Gov’t buying a computer vs you or I is germaine.

    He is also right about the growth of capital. It is one reason I’m so bent out of shape about my farm situation. I consider the unwarranted restrictions (not the real and valuable ones) to be a form of corruption and graft in this county. I consider that these are reducing capital (and not just mine) to a much greater extent than they provide any real benefit.

    I’m willing to give credit back to the government for those (few) projects that make it easier for citizens to create capital. Even if government is inefficient at it, sometimes they are more efficient than private enterprise.

    Frequently private enterprise doesn’t want the jobs we hire the government to do, and inthat case PE is in a poor position to argue about efficiency: a deal is when both sides get what they want. In this case, PE gets to ignore things like homeless people, and government gets to take credit and build empires of people who work on that problem.

  14. Larry Gross Avatar
    Larry Gross

    nah… say you pay a pencil-pusher 100K a year.

    Even if that guy produces absolutely nothing of value – his salary purchases goods and services.

    or.. convince me.. say that a Teacher paid 60K a year produces more than an pencil-pusher for 60K a year more than an executive assistance for a private company that gets paid 60K a year.

    All of them will buy the same equivalent level of goods and services.

    Whether what they produce has a “value” to me .. is an interesting question.

    Does the guy who makes rules that protects the environment “contribute” more than.. the guy who as a private employee.. “contributes” by building gizmos that reduce pollution?

    request: answers with substance and not convential wisdom blather from the “tax and spend” nor the “taxes are wrong” zealots.


  15. James Atticus Bowden Avatar
    James Atticus Bowden

    The executive assistant for a private company will (his company) produce a good or service that produces profit – new capital. That capital has a value to you.

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