Trends in State Tax Policy
The level or burden of state and local taxes has remained remarkably stable at about 11% of personal income for 30 years. So in broad terms, the changes in tax policy have consisted of increasing reliance on some tax sources while decreasing reliance on others.
Until about 1990, state tax policies were following general patterns that had lasted for several decades. Reliance on sales taxes was being increased slowly, primarily by increases in rates.
Reliance on personal income taxes was being increased fairly rapidly. Most of the increases were associated with: (1) the tendency of income tax revenues to rise faster than personal income with no increase in tax rates and (2) adoption of income taxes by additional states.
Reliance on property taxes was being reduced. These changes were interrelated with a gradual shift from reliance on local taxes, primarily the property tax, to finance schools to having a greater percentage of school costs paid by states.
Since 1990, there has been no overriding feature of tax policy changes equivalent to the earlier shift from local property taxes to state sales and income taxes. Both the percentage of state and local tax revenues raised by states and the mix of revenues raised by sales, property, and income taxes have remained relatively stable. There is no overwhelming trend in any direction, though there are some hints of trends shown by the generalizations below.