Taken in conjunction with personal income data supplied by the U.S. Commerce Department, data from a report on “Tax Freedom Day 2014” published by the Washington, D.C.-based Tax Foundation early this month show that federal, state and local taxes consume roughly 32% of all income for residents of the 26 forced-unionism states, compared to a little over 28% for residents of the 24 Right to Work states.
As a National Institute for Labor Relations Research blog post explained on April 8, part of the substantially heavier overall tax burden for forced-unionism states is due to the fact that, on average, their cost of living is roughly 20% higher than the average for Right to Work states. Because federal taxes are levied on nominal, rather than real, spendable incomes, residents of high-cost forced-unionism states like New York, New Jersey and California have to pay higher marginal federal income tax rates than other Americans who are at least equally well off in real terms, but live in low-cost Right to Work states like Texas and North Carolina.
As another recent Tax Foundation report (see the link below) shows, however, differences in federal tax burdens account for less than half of the overall tax advantage for Right to Work state residents.
In 2011, according to Tax Foundation data combined with U.S. Census Bureau data on state populations for 2011, three years ago state and local taxes combined consumed 10.7% of personal income in the 28 states that then lacked Right to Work laws, but just 8.6% of personal income in the 22 states that protected employees Right to Work at that time. (Indiana’s and Michigan’s Right to Work laws took effect in 2012 and 2013, respectively.)
The 11 states with the heaviest state-and-local tax burdens in 2011 (New York, New Jersey, Connecticut, California, Wisconsin, Minnesota, Maryland, Rhode Island, Vermont, Pennsylvania and Massachusetts) are all forced-unionism. Meanwhile, 10 0f the 12 states with the least burdensome state-and-local taxes are Right to Work.
On average, state and local taxes consumed a 25% higher share of personal income in forced-unionism states than in Right to Work states in 2011. The primary reason for this is that government spending per capita was far higher in forced-unionism states. A future Institute blog post will focus on the state spending side of the fiscal equation.