How Would the 'Fiscal Cliff' Affect State Tax Burdens?

By on November 16, 2012 in Current Events with 3 Comments

You’ve by now heard about the infamous “fiscal cliff” and the tax increases set to take place in 2013. For more information on these potential increases, see What Does the ‘Fiscal Cliff’ Mean for your Personal Tax Burden? and Critical Tax Issues that MUST Be Addressed in 2012.

But what do these tax increases mean in terms of state tax burdens?

The Tax Foundation recently issued a report to help answer this question. The report is designed to illustrate the potential impact of the scheduled 2013 tax hikes on typical families in each state.

According to the report’s data, every state faces a tax increase as a percentage of income with the potential increases ranging from 4.32% to 6.82%. Some states potentially fare better than others, however. The following two tables list the top and bottom 10 states in terms of potentially increased tax burdens.

For a full state-by-state breakdown and more information on the data used to compute these figures, be sure to check out the full report on the Tax Foundation’s web site.

Top 10 States
State Median Household Income for Four-Person Family (2011) Tax Increase 2011 to 2013 Tax Increase as % of Income Rank
New Jersey $101,682 $6,933 6.82% 1
Maryland $106,707 $7,194 6.74% 2
Connecticut $100,451 $6,653 6.62% 3
Massachusetts $101,523 $6,632 6.53% 4
New Hampshire $97,441 $5,660 5.81% 5
North Dakota $84,896 $4,825 5.68% 6
West Virginia $65,403 $3,612 5.52% 7
South Dakota $72,460 $3,997 5.52% 8
Arkansas $55,444 $3,056 5.51% 9
Mississippi $58,047 $3,108 5.36% 10

 

Bottom 10 States
State Median Household Income for Four-Person Family (2011) Tax Increase 2011 to 2013 Tax Increase as % of Income Rank
Maine $78,310 $3,489 4.46% 41
Iowa $76,777 $3,383 4.41% 42
Nebraska $75,495 $3,289 4.36% 43
Delaware $83,424 $3,622 4.34% 44
California $74,122 $3,212 4.33% 45
Illinois $79,138 $3,417 4.32% 46
Kansas $74,853 $3,227 4.31% 47
Colorado $85,027 $3,646 4.29% 48
Hawaii $82,973 $3,453 4.16% 49
Washington $81,582 $3,362 4.12% 50

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About the Author

Ian Smith is one of the co-founders of FedSmith.com. He enjoys writing about current topics that affect the federal workforce. Ian also has a background in web development and does the technical work for the FedSmith.com web site and its sibling sites.

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  1. Fed_Peasant says:

    This could indirectly impact the munipical bonds issued by a state.  Those ratings may drop.  Defaults may be more likely.  Insurance for certain “munis” may even go up.

    • D Byte says:

      You mean increasing revenue will not improve the S&P ratings?  It usually improves when a business increases revenue.

      • Fed_Peasant says:

        You have a good point.  I expect that the overall budget stress of higher taxes as they “rob Peter to pay Paul”.  Tax protests, etc.  Munis may get lower priority, when facing budgets.  There are limits to higher taxes.  Companies are know to be averse to high tax locations, which may hinder the revenue anyway.  It will be easier to say screw the investors.

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