off the charts

Top 5 (+1) State Tax Charts

As we approach Tax Day, these six charts put state taxes — and the programs those taxes fund — into context.

More than half of state tax dollars go to fund education (K-12 and higher education) and health care, as the chart below shows.  State tax dollars also fund other critical services such as transportation, corrections, public assistance, care for residents with disabilities, police, state parks, and general aid to local governments.

State revenue losses from the Great Recession were both deeper and longer lasting than in previous recessions, as the chart below shows.  Not until the end of 2013 did revenues finally return to pre-recession (2007) levels.  Since then, the gradual improvement has stalled, leaving state revenues roughly where they were when the recession hit, after adjusting for inflation.

While state revenues have improved since the depths of the recession, they have a long way to go.  As revenues have stagnated, state needs have increased.  For instance, the number of students in public elementary and secondary schools has risen by about 485,000 since the fall of 2008, the first full school year after the recession started — but school districts nationally employ 288,000 fewer workers.

While most states have used their gradually improving revenues to help their schools recover from cuts imposed after the recession hit, some states have made it more difficult for their schools to recover by sharply cutting income taxes.  Six of the seven states that have made the deepest cuts in general funding for K-12 education since the beginning of the recession have also enacted major income tax cuts, as the chart below shows.  These tax cuts eliminated revenue that could have helped states reverse the deep funding cuts from the recession and invest in promising education reforms.

As the chart below shows, low-income families pay significantly more of their income in state and local taxes than very wealthy families.  State and local taxes push many families into — or deeper into — poverty.

A state Earned Income Tax Credit (EITC) is a powerful tool to prevent state and local taxes from pushing low-income working families deeper into poverty.  Twenty-five states and Washington, D.C., have their own EITCs, as the map below shows.  A state credit builds on the federal EITC’s proven effectiveness in helping low-income working families make ends meet.  States looking to encourage work and reduce poverty, especially among children (the federal EITC lifts millions of children out of poverty), should consider enacting or expanding an EITC.