K-12 Tax & Spending Climate: States’ Tax Revenue Sources

John Gramlich:

Oregon, more than any other state, relies on its residents’ income tax payments for revenue, while its northern neighbor, Washington, depends more heavily than any other state on sales taxes, according to a new 50-state analysis of state finances.
The analysis by the nonpartisan Tax Foundation uses newly released U.S. Census Bureau data about state and local government finances in fiscal year 2007 (the latest year for which statistics are available) to break down each state’s tax revenue sources and group states by which taxes they rely on most. The report combines state and local taxes for the sake of comparison because “what some states accomplish with local taxes is accomplished in other states with state-level taxes.”
States that rely too heavily on one tax are vulnerable to revenue fluctuations that can be especially harmful during recessions. In Oregon, for instance, where individual income taxes account for 44.1 percent of total government tax revenue, lawmakers this year were slammed by a huge revenue decline as employment — and personal income — decreased. That has resulted in major spending cuts and is forcing some school districts to resort to four-day weeks.