Capitol & State

Other ways to measure Idaho’s tax burden

To say that there’s more than one way to look at tax numbers is perhaps a vast understatement. Consider our Oct. 31 tax story, which listed figures on per capita tax burdens for residents of Idaho and surrounding states.

Data from the chart, which you can view again here, came from the U.S. census. The figures take the total taxes collected in each state and divide by population to come up with per capita tax figures, which looks like this:

Table 1. Census tax data, 2012

By that measure, Wyoming, among the surrounding states, ranks at the top on total state and local tax burden as a percentage of per capita income. Idaho ranks in the bottom fifth, at No. 41 nationally.

This is a fine and standard measure for comparison purposes, but as Fred Birnbaum of the Idaho Freedom Foundation wrote to us, there’s another way to drill into the data that measures actual per capita burdens more precisely.

The Washington, D.C.-based Tax Foundation takes government data and slices and dices it according to an elaborate 20-page methodology. The foundation’s latest work-up covers the 2011 tax year; its 2012 analysis is still in the works.

“It is not easy to reproduce,” said Jared Walczak, a policy analyst for the foundation. “It takes us an extremely long time to do so.”

In its state-by-state analysis, the foundation backs out of the per capita calculation taxes that states collect from other states, such as excise or severance taxes—on minerals, in the case of Wyoming, or oil, in the case of Alaska. Severance taxes refer to the extraction, or severance, of non-renewable natural resources. In Alaska’s case, Walczak said, “the vast majority of the tax burden is being exported to payers across the county and even across the world.”

These are the tax numbers for the same seven states and U.S. overall for 2011, according to the foundation’s analysis:

Table 2. Tax Foundation analysis, 2011

In this reckoning, Wyoming drops to last in terms of tax burden and Idaho is roughly middle of the pack. Utah, frequently compared to Idaho, is a few notches below. These numbers include taxes residents paid to other states.

Here’s the same breakdown for what residents pay only to their states:

Table 3. In-state only, 2011

Wyoming is still lowest, and Idaho drops a few notches down, below Utah.

More recent data from the Federation of Tax Administrators looks at state-only taxes for 2014. As with the first table, Wyoming is back on top:

Table 4. State taxes only, 2014

Here’s how to look at these differences:

The numbers in Tables 2 and 3, given the Tax Foundation’s exacting methodology, are the more accurate assessment of what residents actually paid per capita. But they take into account taxes that are beyond each state’s ability to control – that is, taxes assessed from other states.

The per capita numbers in Tables 1 and 4 can be said to reflect actual state tax policy more accurately, because those numbers are based on tax collections that are entirely within the state’s ability to control.

One more thing to note: What is consistent through all the measures is that Idaho’s per capita income is low. In fact, it’s pretty much consistently the second lowest in the nation, ahead of only Mississippi. In dollar terms, its per capita tax burden ranks 39th, about $550 more than Mississippi in the 2011 Tax Foundation analysis. Idaho’s lower wages make for a higher tax burden as a percentage of income compared to other states.