Foreword

Passage of the Revenue Act of 1951 will still leave th• Federal budget unbalanced urless expenditure sare cut sharply or taxes increased. If sufficient economies to balance the budget are not effected and _deficit financing is to be avoided further tax increases will be necessary . There is little unanimity, however ,on methods to obtain additional revenue through increased taxes.

The virtues and vices of "direct" aad "indirect" t .xes, `Progressive" and "regressive" taxes havebeen masterfully exploited in order to add conviction to viewpoints expressed by various groups. Chargeshave been made that s:.les taxes are increasing in such amounts as to snow under the taxpayer . On thebasis of these charges, certain groups are demanding that the Federal government refrain from increasin gany excise taxes and, instead, turn to income taxes as the source of added revenue. It has been said, onthe other hand, that income takes are already at a dangerously high level in view of the need for ma* .ntanning individual incentives to produce and for encouraging private investment for high productio nof civilian goods_and services.

Some of the views set forth have turned for evidence to the cause of state tax collections durin grecent pears. For example, it has been maintained that income taxes should bear the brunt of any taxincreases because state and local governments have "increased their sales taxes by $2.5 billion since 1945."

This study analyzes the major state tax yields and rates during the past decade . It also sheds some -light on the extent to which increased yields of the sales taxes reflect increased tax burdens .

Seven major state taxes have been selected for study—the four major excise taxes (general sales ,- alcoholic beverage, tobacco and motor fuel), the income taxes (corporate and individual) and the motor

vehicle tax. Receipts from these taxes constituted 70 percent of all state tax collections, excluding un-employment compensation taxes, in 1939 and 77 percent of the 1950 total . (See Table ig) .

CONTENTS

Paps

-

FJBEWORD _

3

CHAPTERS

=

A. THE SALES TAX

-

5

-L Tax Babes s

-_

2. Tax Collections 6

-

.̀3 . -mates and Collections 6

IL INCOME TAXES 7

1

-

L Tax Rates 7

--

2. Tax Collections 12

=3. Rates and Collections 13

C. MOTOR Ft-.TEL TAXES 14L Tax Rates 14

`. Tax Collections 14& Rates and Collections 15

_

D. TOBACCO TAXES 16L Tax Rates 16

-

2. Tax Collections 173. Rates and Collections 18

E. ALCOHOLIC BEVERAGE EXCISE TAXES 181. Tax Rates 18

-2. Tax Collections 18& Rates and Collection s 20

F. MOTOR VEHICLE TAXES 211. Tax Rates 21

f2. Tax Collections 213. Rates and . Collections 21

G. SUMMARY 23

THE SALES TAXThe sales tax has mans variations : a tax on retail sales and usually on admissions : a tax on general

sar -t which, in addition to sales at retail, applies to wholesaling, extractive indusL-ies, and manufacturing ;a tax on gross receipts which, in addition to the transactions and receipts listed above, includes sales o fpublic services and personal and professional services ; and a gross income tax which applies to al ltransactions and receipts already listed, to receipts from non-business activities such as wages : ndsalaries of employees, and to interest, rents, and dividends . The retail sales tax, which is the mostpopular, and the gross receipts tax are usually supplemented by a use tax .

Table 1

-STATE S_ LES TAX RATES

-

As of November 1, 1939, and -December 31, 1930

Neater I . lass

December It, tsss

tams for

Rama forSeale

Type of Taxa

Watts

Sala

Type of Tax*

RemaR

Sates

- -

Alabama

Retail Sales"

2%C

Retail Sales'

2%cArizona

Generai Sales

2

General Sales

2

-Arkansas

-Retail Sales

2

Retail Sales

2California

Retail Sales►

3

Retail Sales"

3Colorado

Retail Sates"

2

Retail Sales"

2Connecticut

—

—

Retail Sales'

2Florida

—

—

Retail Sales"

3Illinois

Retail Sales

Retail Sales

2Indiana

Gross Income

1

Gross Income _

%Iowa

Retail Sales"

2

Retail Sales"

2lsansas

Retail Sales"

2

Retail Sales"

2Louisiana

Retail Sales

1

Retail Satesb

2Maryland

—

—

Petail Sales"

2Michigan

Retail Sales"

3

Retail Salest

39disstsslppi

Gross Receipts"

2

Gross Receipts"

2.4issoun

Retail Sales

2

Retail Sales

2Neer Mexico

Gross Receiptst

2

Gross Receiptst

2North Carolina

General Sales"

3

General Sales"

3North Dakota

Retail Sales"

2

Retail Sales"

2Ohio

Retail Sales"

3

Retail Sales"

3Oklahoma

Retail Sales"

2

Retail Sales"

2Pennsylvania

General Sales

1/10

—

—Rhode Island

—

—

Retail Sales"

1South Dakota

Retail Sales"

3

Retail Sales"

3Tennessee

—

—

Retail Sales"

2Utah

Retail Sales"

2

Retail Sales"

2Washington

Retail Sales

2

Retail Sales"

3;Gross Receiptsa

'A

Gross Receipts

2AWest Virginia

jRetail Sales

2

Retail Sales

2(Gross Receipts

ui

Gross Rece ;ptsn

%Wyoming

Retail Sales"

2

Retail Sales•

2

•Type of tax :(1) Retail sales : imposed on sales of tangible personal property at retail or for consump -

tion ; in most states also on admissions, restaurant, and public utility sales .(2) General sales : applies to wholesaling, extractive industries, and manufacturing. in addi -

tion to sales at retail .(3) Gross receipts : includes sales of public services and persona : and professional service s

in addition to transactions and receipts under (1) and ,2) .(4) Gross income : applies, in addition to all transactions and receipts under (1), (2) . an d

(3), to receipts from non-business activities such as wages and salaries of employees.interest, rents, and dividends.b A use tax is also levied .c One-half of 1% on sales of new automotive vehicles, truck-trailers, and semi-trailers .4A 105c credit is allowed .

Source : Commerce Clearing House .

5

1 :

-

Tax RatesWest Virginia, in 1921, was the first state to enact a sales tax . During the 1930's, this form of

taxation gained popularity ; and by 1939 a form of the sales tax was being used by 24 sta .-A. By the end-of 1950, however, this number had increased to 28 . During this time, two states--Louisiana and Wash-ington—increased their sales tax rate3 and five st .-tes--Connecticut, Florida, Nfaryland, Rhode Islandand Tenneseia-adopted this tax . Two states--Illinois and Indiana—reduced C.eir rates ; and one,Pennsylvania, abolished the tax . The finweighted average state retail sales tax w`te in 1939 was 2.12percent for the states which then had the tax and in 1950 it was 2 .19 percent for the states with the tax

V'in 1950. Three states have adopted a sales tax in 1951 and two states have increased their rates .- able1 compares tl :e 1939 and 1950 state sales tax rates .

-

There is no Federal sales tax although excise taxer are levied upon certain items_

_

Table 2

STATE SALES TAX COLLECTIONS BY =GTAT E

Fiscal Years 1939 and 1950(Thousatlds )

state 19"s its* state 1Im MOO

Total $451,213 $1,670,161 Michigan

- 451 .838 ;204 6MMississippi 6;296 24.54 0

Alabama 5,921 32 .662 Missouri 22,488 = 72,084Arizona 3.571 16.138 New Mexico 3,440

17,384Arkansas 4,937 23,147 North Carolina 10,995 41,84 8California 88,365 321 1560 North Dakota 2 .751 =

11,563Colorado 8.455 25,901 Ohio 47.864 133.06 8Connecticut

— 23.689 Oklahoma 11 1782 34,839Delaware -- 13e Rhode Island — 5.799Florida — 23,569 South Dakota 4,158 _

1:.048Illinois 81,696 =166,951

= Tennessee — 42,505Indiana 19,982 86.550 Utah 3.725 14,014=Iona 15.423 55,741 Washington 20,332 104,727 1Kansas 9.744 37.430

'- West Virginia 17,349 51,911

=Louisiana 8,248 45,003 Wyoming 1,853 7,192Maryland — 28,377

aData are for fiscal years ended in the calendar year ; data are only roughly comparable withcollections in later years because of revisions in reporting by the Department of Commerce.

-- Includes all local shares of state-imposed taxes .t.Data are for fiscal years ended in 12-month period ending June 30 . Includes only those loca l

shares of state-imposed taxes which are not local :y collected and r_- 'ained. Data are pre-liminary ; subject to possible limited revision . _ -

c Back taxes.Source : Department of Commerce.

CollectionsThe sales tax yielded more revenue in 1950 than any other single state tax, despite the fact that i t

was levied by only 28 states. It accounted for over 21 percent of the total state tax yield whereas i n1939 it produced approximately 15 percent of the total tax collections . Revenue from these sales taxesincreased by $1,219 million, or 270 percent, during this eleven-year period . In those 28 states whichimposed a sales tax, revenue from this source accounted for over 35 .5 percent of total tax collections in1950. Table 2 sets forth the collections for the two years under discussion .

Rates and CollectionsIf Tables 1 and 2 are examined in concert, it can clearly be seen that the tremendous rise in sale s

tax collections is attributable only to a very small degree to increases in the rates of these taxes . Of the24 states imposing a sales tax in 1939,19 had not changed their rates by 1950. Collections in these states

6

increased by 259 percent . In other words, in 1950 the states levying the same tai_ at the same rake col-lected $3.59 for each dollar collected in 1939. Obviously, this increase in collections was due to factorsother than rate changes.

d

In 1939, the value of personal consumption expenditures (durable and non-durable commodities )- was $41,987 million. In 1930, this amount was $131,467 million, an increase of over 213 percent. In view

of the fact that the rate of increase in the sales tax yield of all the stattes was 2U percent, the rise insales tax yields was due primarily to higher prices and increased consumption and only to a slight degreeto an-increase in rates. The increased collections, therefore, bespeak not so much a greater relative ta xburden on the consumer but a corollary of higher scales of living and higher prices .

_

The sales tax is the only one of the seven major taxts under_ study here- that is not used by the--:,Federal government.

-

-

INCOME TAXESTax Rates

Taxes on corporation income are now imposed by 32 states . Since 1939, ten states—Arkansas,Colorado, Connecticut, Georgia, Kentucky, Maryland, Massachusetts, Minnesota, Vermont, and Virginia—have increased rates or added surtaxes, and one state, Rhode Island, adopted the tax . New York decreasedits rate from six percent to five-and-one-half percent but added a tax on subsidiary capital . Seventeenstates_ made no rate changes, Uhree lowered rates, and South Dakota repealed its corporation income tax . -

IIn 1951, four atates increased corporation income tax rates and one state allowed a temporary

- iincresse in this tax to expire.

Table 3 compares 1939 state corporation income tax rates with those in effect in 1950 .

- In 1939, the Federal corporation income tax ranged from 12.5 -percent to 19.0 percent, withreductions for "dividends received credit" and "dividends paid credit'' allowed where taxable incom ewrs over $25,000. The 1950 Federal rates (as provided by the Revenue Act of 1950) consisted of anormal tax of 23 percent and a surtax of 19 percent with a $25,000 credit allowed for the surtax . Forsubsequent years, this revenue act increased the normal tax to 25 percent and the surtax to 22 percent .The Revenue Act of 1951, currently under consideration, would raise the normal tax to 30 percent an dleave the surtax at 22 percent, effective April 1, 1951 .

"

At the end of 1950, 31 states were imposing some form of personal income tax . Fourteen of thesestates made no change in the rate of tax from 1939 to 1950 . Some of the others increased rates, a fe wdecreased rates, and many changed the graduation scale so as to tax the income brackets at graduate drates.

In 1951, one state increased its individual income tax rates. Table 4 presents 1939 and 1950 stateindividual income tax rates.

The Federal individual income tax rates in 1939 were a normal tax of four percent and a surta xgraduated from four percent on the surtax net income bracket of $4,000-$6,000 to 75 percent o nsurtax net income above $5 million. For 1950 and 1951 a three percent normal tax was in effect plus asurtax graduated from 17 percent on the surtax net income bracket, 0 up to $2,000 to 88 percent o nthe surtax net income above $200,000, (subject in 1950 only to reductions varying from 13 percent t o7.3 percent depending upon the size of the income) . The 1951 Revenue Act would _i_mpose an 11 .75 percentincrease in the Federal individual income tax, effective November 1, 1951 .

:1 .

Table 3

STATE CORPORATION INCOME TAX RATES

As of July 1, 1939, and December 31, 1950

Ggeratim %et Iaee~ Tax Rates

~

State lair 1. is" Decmber 31. ISM

Alabama 3% 3yo

=

Arizona Graduated from 15' on first #1,000 Graduated from 1% c

first #1,000

=

to 5% on all above #6,000. to 55c on all above #6,000.

_

Arkansas 2% 'Graduated from 1 1c on first #3,000

to 5 17c. on all above 425,000.

California 49'a 45%

Colorado 4% 5~e•

-

Connecticut 27oy 3% ►

Delaware — —

=

Florida — —

Georgia S% c o~ Z vi'

Idaho . Graduated from 1 .5;'a on first #1,000 =

Graduated from 1 .550 on first #1,000

to 8% on all above #5,000. to 81% on all above #5,000.

=

Illinois — —

1

Indiana — —

Iowa 2% Tro

Kansas 211'e 21e

Kentucky 45'0 L-'4 .6%

Louisiana 4% e 4%e

Maine — —

Maryland 1 .55'0 -

45e4

Massachusetts 2.55'a 2 55'0•

Michigan

Minnesota 61b 6%(

Mississippi Graduated from 3% on first #2,000 Graduated from 1% on first #4,000

to 6.5% on all above #15,000. to 6% on all above #25,000.

-

Missouri 2 r'o 2c,*

Montana 3% -

Wo

Nebraska — —

Nevada — - —

New Hampshire — —

New Jersey — —

New Mexico 2 c/o 2 %

New York 6% b 5 .5%b s

North Carolina 9% 6%

V

Table 3 (Confirmed)STATE CORPORATION INCOME TA .RATES

As of My 1, 1939, and December 31, 1950

Grwawa Net Inc+eine Tax Ratesatria

Mir I. ffts

Deorisier 21. me

_

North Dakota

Graduated from 3% on first $3,000

--_' Graduated from 3% on first $3,000

_to 6% on all above $15,000.

to 65"o on all above $15,000.Ohio

—

-

_

-

Oklahoma

656

4%Oregon

8% b

g0+oa

=-

Pennsylvania

?°'0

OreRhode bland

_

4%b

South Carolina

4.55'ob

- 4 .5%b

c ;

South Dakota

Graduated from 1% on first $1,00 0

to 8% on all above 3318,000.

Tennessee

3 .75'10

=

3.755'0

Texas

—

_

_

Utah

3%b

3%bVermont

2%

40%Virginia

3%

556 1 .Washington

—

_

West Virginia

Wisconsin

Graduated from 2% on first $1,000

Graduated from 25'0 on first $1,000to 6% on all above $6,000 J

to 6% on all above $6,000.1

-Wyoming

& A credit of 20% is allowed for one taxable year beginning after December 31, 1949.bThere is an alternative method of computing the tax which must be used if it yields a greater tax .e On net income in excess of that portion of $3,000 which the taxable net income bears to total net income .

_Domestic corporations are allowed to credit against the tax franchise tax payments in excess of $25 .

*In addition, there are the following taxes : (a) a temporary surtax equal to 20% of the regular income tax; (b) an addi-tional surtax equal to 3% of the regular income tax (for old-age assistanct) ; and (c) additional taxes equal to 3% of netincome (for veterans' furd).fIn addition, a surtax of 5% of the regular rate plus a tax of $5 on each taxpayer.win addition, there is a tax of one-half mill on each dollar of allocated subsidiary capital up to $50,000,000 ; one-quarter mill oneach dollar of the next $50,000,000 ; and one-eighth mill on each dollar of such capital over $100,000,000.bSubject to an offset for personal property taxes paid, up to 50% of the excise tax in the case of mercantile, manufacturing, an dbusiness corporations.

-

1A credit of 10-20%, of tax is allowed for fiscal years ending in 1951, depending upon specified amount of receipts into the stat etreasury during the fiscal ye-r ending June 30, 1951 .11n addition, there is a surtax computed by deducting $75 fromthe normal tax and dividing the remainder by six .

`Source : Commerce Clearing House.

17

C(D

0 Table 4

C,:-,STATE INDIVIDUAL INCOME TAX RATES

As of July 1,J939, -and December-31, 1950

C

Stab J"IY 1. 1"t December 31 . IM

Alabama Grcduated from 1W o first $1,000 to 5% on Graduated from ! .511a on first $1,000 to 5%, o n0all above: $5 .X0W0 aii above $5,000

Arizont Graduated from 1% on first $?,OOC to 4 .5% on Graduated from 1% an first $2,000 to 4.5 %. an.all above $9,000 all above $5,000

Arkansas Graduated from 15c on first $3,000 to 5% on Graduated from 1% or first $3.000 to 5% onc, o all above $25,000 all above $25,000

California Graduated from 1% on first $5,000 to -155p on Graduated from 1 17a on first $5.000 to 6% onall scene j2250Q.A000 all above $25,000

-

Colorado `Graduated from 1% on first $2,000 to 65'sa on Graduated from I% on first 41,000 to 10 9'0 onall above $10,000& all above PIAW

c, Delaware

c. Graduated from Pro on first $3*000 'to 3% on Graduated from I % 5.r - on first $3,000 to 6% to"a

IS alone $10.000 ..-on all above $50,000Florida i

Georgia Graduated from 1% on-first $7,000 to , 7% on Graduated from 1 9"0 on first -$7,000 to 7% onall alone $20j000 all above $20,000

Idaho Graduated from 1 .51% on first, $1,000•to 8% on-! `_ -:

Graduated from 1 .59o' on " , $1 .000 to 8% onall above $5,000 aH :above,55 .000-

Illinois -IndianaIowa Graduated from Pre on first $1.000 to 5% on, -Graduated from 1% on first $1,000. to 5% on

all above $4,000 idl above $4,000cKansas Graduated from 1% an first $2,000 to 4 %, or. Graduated from 1% on first $2,000 to 4% on

all above $7,000 all above $7.000Kentucky Graduated from 2% on first ;3,000 to Won C Graduated from 2% -on first $3,000 to 6% on

I

all above $5,000 '1-

all above $8.000Louisiana Graduated from 2% on first $14,000 to 6 90 on Traduated from 2%,on first $10,000 to 67 a, -on

all above $50,OM all above $MWVX.000"MaineMaryland 6,Zc of investment incoun , plus 2.5% of other 5% of investment income plus 2% of other

f mome income

AMassachusetts 1 .54% on irr.=.Q from businesses, professzens, 1 .5efc on income from businesses, professions,

employments, and annuities ; 35, on exces,- employments and annuities ; 3% on excess-of gains over tosses on intangible personal of gains over losses on inuLngible personaproperty ; and 6%-. - on incomke from certain and 6% on income from certain-,property;intangibles4 'intangiblevs

MichiganMinnesota Graduated from 15. on fint *1,000 to, 109o' -on Graduated from 111r on first $1,000 to 1010 on

all above t20 .000 all above 320.0000Mississippi Graduated from 35, on first $2,000 to 6.517c Graduated fr(jm 117c on first $4,000 to 6% on

on all about $15,000 all above $25.00Missouri Graduated from 15c on first $1,000 to 4%, on Graduated from 151S on first ;1,000 to 4% on

0 all above SAW all above $9.0009Montana Graduated from 1% on first 12,000 to 4 ,,,t- an Graduated from 117c on first 42,000 to 4% on

all above-$6,000 all above $6,000, -Nebraska

V Nevada$0w Hampshire On interest and dividend income over $200 On WL-rest and dividend income over $200

only ; at average property tax rate ir, the- only ; at averarage property tax rate in the-state state

New JerseyNew Mexico , Graduated from 117c on first $10,000 to 4% o p Graduated from 11% on first $10,000 to 4% o n

all alone $100A00 -0

all above $100A00New'York Graduated from 217o on first $1,000 to 7 1/c on Graduated from 2% on first $1,000 to-71/o on ,

all aunt $9 .P000h all above $9,0001North Carolina Graduated from 3% on first t2,06-to 7% on Graduated from 3% oa first $2,000 to 7% on .

all above $10,000 all above $10,000-7

_

Table 4 (Continued )

STATE INDIVIDUAL INCOME TAX RATES

-As of July 1, 1939, and December 31, 1950

Ta: Lwstate

job, 1 .1939

December 31. 19MC

North Dakota

Graduated from 1%_bn first $2,000 to 15% on

Graduated from 1 ;b on first-52,000 to-1597a onall above $15,000

all-above $15,000

-

Ohio

—

Oklahoma

Graduated from iHC on first $1,000 to 9% on

Graduated from 1% on first $1,500 to 67r onall above $8,000

all above $7,500

Oregon.,-

Graduated from 2% on first $500 to 7% on all,

Graduated from 2% on first 5500 to 8°/a on al labove $4,0001

-

_

above $8,00 0

Penmsylvani:

-

-C,

_Rhode Island

=

4

South Carolina

Graduated from 2% on first $2,000 to 5% on

Graduated from 25c on first ;2,000 to 5yo onall above $6,000k

all above $6,000

S_ outh Dakota

Graduated from lac on first $1,000 to 9% on

- -all above $318,00 0

Tennessee

4% to 6% on income from certain stocks and

4% to 617c on 9ncome from certain stocks an dbonds

bonds

Texas

Utah

Graduated from 1% on first $1,000 to 515a on

Graduated from 15c on first $1,000 to 5 1% ont

all above $4,000

all above $4,000

-

Vermont

2% on net income ; 4 1516 on interest and divi-

Graduated from 1 .55e on first $1,000 to 5 .5%dend income

on all above $5,000- -

Virginia

Graduated from 1.5% on first $3,000 to 3% on

Graduated from 2% on first $3,000 to S rjo_ onall above $5,000

all above $5,000 1- Washington

—

—

-

West Virginia

Graduated from 110 on first $1,000 to 4% on

—all above $3,000

Wisconsin==

Graduated from 1% on `first $1,000 to 7% on

--_Graduated from 1% on first $1,000 to 7qa onall above $12,000=

all above $12,000=•$

__ --_

-Wyoming

—~

& In addition, there is imposed a 2% surtax on residents' income from dividends, royalties, and interest ,b In addition, there is imposed a surtax of 2% on income in excess of $200 derived frcm dividends, royalties, etc . A credit-of g9% is , -

allowed for one taxable year beginning after December 31 ; 1949 .

c

-c25% credit is allowed.

`4In addition, there is imposed a temporary tax of 155r .e In addition, there are the following taxes : (a) a surtax equal to 20% of the regular income tax, and (b) an additional surtax equa lto 3% of the regular income tax . Annuities taxed at 1 .5% refers to other than property held in trust which is taxed at 6 :'c. "Certai n

intangibles" includes interest from bonds, notes, money at interest, and all debts due to the taxpalst .t in addition, there is imposed a surtax equal to 5% of rate.s Deductions from tax graduated from $5 on net taxable incomes of $1,000 to $2,000, to $135 on net taxable incomes over $9,000 .h Capital gains are taxed at one-half the regular rates . There is also imposed an emergency tax of 1% on net income .

Capital gains are taxed at one-half of the regular rates . For fiscal years ending in 1950, both the income tax and the capital gain stax are reduced 10% Income from unincorporated business is taxed at 3% .

-

c

I There is imposed a surtax of 2% upon interest, dividends, stock dividends, money, and credits .s in addition, there is imposed a tax on dividends and interest graduated from 3% on $500 to $800, to 5% on income over $r1,W0.

-t A credit of 10 .20% of tax is aliowed for the taxable year 1950 depending upon specified amount of receipts into the state treasur y

'_u

during the fiscal year ending June 30, 1951 .= In addition, there is imposed a surtax computed by deducting $37 .50 and the personal exemptions from the . regular income tax an ddividing the remainder by 6.

_-

In addition, there is imposed a surtax equal to 25% of the regular income tax .t

-

-

callecemnState collations from corporate and individual income taxes yielded W29 million more in 1950

than in 1939. This was an increase of 296 percent, second only to the percentage rise in tobacco ta xcollections. Corporation income tax yields accounted for the larger portion of this increase . In 1939,30 states Ievied both corporate and individual income taxes, and revenue from these taxes constituted17.5 percent of the toil tax re%mue in these states . In 1930, 29 states levied both taxes and 252 percen tof their total tax collections were accounted for by receipts from these taxes on income- Income taxe s-mere responsible for only 10.8 percent of ttA total tax yield from all states in 1939 and for 16.6 perneatof the 1950 f-W state tax collections.

On the Federal level, 1939 collections, before refunds, from individual and corporate income taxesamounted to $2,185 mi9ion or 49 pet%*nt of total Federal tax collections, while in 1950 collections fromincense taxes were 428,001 million or 77 percent of the total tax collections .

-

State cm7wrate and individual in~me tax collections for 1939 and 1930 are detailed in tables S and

Table S

_

STATE CORMHATION LNCO31E TAX COLLEMONS BY STATEFucal. Years 11939 and 1950

(Thousands)

cleft Ism 1f1M awe HM 125M

TOW I134X-1 M65-9 3tiswari $6,1734 $..5,2391Montana 335 1,678

Alabama 934 8851 Kew Mexico 239 155_

Arimna 544 2,897 New York 4.,147 190,66 ;Arkansas 306 1,857 Forth Carolina - 6.%0 30,015California 20"0 74AN

_ North Dakota 149 1,30 6Colomdo 706 5,87 Oklahoma 4,585 4,893C

mecticnt $834 12,200 Oregon 1,484 17,017Georgia 2,700

- 14 1M Pennsylvania 15,141 64,199Idaho 3 i 3,"7 Rhode L4and - 4=Iowa 761 2,648 South Carolina , 1,571 14,48?Kansas 867 3,456 South Dakota 5745 -Kentucky 1,518 8,305 Tennessee 1,784 10,443

-Louisiana 2,891 18,7681 Utah -

1,024 2,584Maryland 305 10,463 Vermont 158 1,17 2Massachusetts 1,277 19,450 Virginia 2,077 18,45 8

- Minnesota 6,492 15,567 Wisconsin 6,310 40,315Mississippi

852

7,637

•Data are for fiscal pears ended in the calendar sear ; data are only roughly comparable withcollections in later years because of revisions in reporting by the Department of Commerce .Includes all local shares of state-imposed taxes .

► Data are for fiscal years ended in 12-month period ending Jane 30 . Includes only those sharesof state-imposed taxes which are not locally collected and retained- Data are preliminary ;subject to possible limited revision .

cFinancial institutions only; other corporation income taxes sae included with individua lincome taxes because they are not segregable .

dlncludes individual income taxes ; not segregable.Source . Department of Commerce.

12

Table 6STATE INDIVIDUAL MCOME TAX COLLECTIONS BY STATE

Fiseal Yaws 1939 and 1950( )

90000

Total

ism

25524,379

ISM sree

Missouri

ism

u+

ISM

~25.259 <Montana i 3~a7

Alabama I'm 10149 rtes Hampshire 745 1,119Arisooa 3412 2,619 xcwxeziw 269 lowArkansas 343 4.343

- Newyork 103.3x9 2412,9141California 20 AM SCAN North Ciinlina t"T 24,397Colorado 1,361 ILM North Dakota 274 3,697Delaware I'm

_7,3419 Oklahoma 2,449 7,260

Georgia 2,290 10.391 Oregon 3.= 29,460Idaho S" 5,354 South Carolina I.M _ 10 92Iola 3,493 15 12 South Dakota Mail

Zansas 1,325 3,313 Tennessee 1336 3,045Sentocky 1,941 Ilv= Utah 630 4,111laoisiana 2,314 I9,769r Vermont sa 3,03?Maryland 510 is= Virginia 2,161 25,993Massachusetts IW* 44,:22 West virginia 1 .3nMinnesota 8"T 37,351 Iviseotuin 7.319 45NTMississippi $61 4,497

& Data awe for kxal fears ended in the calendar year ; data are only roughly comparable withcollections in later years because of revisions in reporting by the Department of Commerce _Includes all local scare : of state-imposed taxes_

b Data are for fiscal years ended in 12 .meath period ending Jane 31L facades only theselocal shares of state-imposed taxes which are net locally collected and retained . Data arepreliminary; subject to possible limited revision.

c Includes corporation income taxes ether than these of 5nancial institutions ; not segregable.i lncluded with corporation income taxes; not segreiable.

Source : Department of Commerce-

Rata aad Collections

The propensity of both the states and Federal government to rely more heavily upon income taxe sas a source of revenue is evident. State corporation and individual income tax collections combined,increased from $331 million in 1939 to $1,310 million in 1950, an increase of 296 percent. This was anincrease second only to sales tax =::sections in amount and, relatively second only to tobacco taxes .Federal 1950 income tax collections were almost twelve times as great as the 1 y39 collections.

Although rates on these taxes have increased, other factors have undoubtedly had a great influenc eon the huge rise in collections. For example, while individual income tax collections for the statesimposing such a tax both in 1939 and in 1950 increased by 248 percent, total personal income increase dby 210 percent during the same period . This riste in personal income indicates that individual incom etax collections would have increased even though there had been no rate changes .

The relatively minor role that increased rates exerted in influencing state income tax collectionscan be shown even more clearly in the case of 'he corporation income tax . Collections for those stateswhich levied this tax both in 1939 and in 1950, ncreased by 367 percent . During this same period, cor-porate profits, before taxes and after inventory valuation adjustment, increased by $30.4 billion or524 percent.

13

MOTOR FUEL TAXESTax Sates

All 48 states levied a tax on motor fuel in 1939. This situation still existed it 195" but over one-halfof the states had raised their rates during this period . Colorado, Kansas, Kent-V.iy, : Ands aa, 31iine,New Mexico, and Oklahoma raised their rates by two cents to two-and-one half cents per gallon, whil ethe inaeases in the other 19 states were lesa than two cents per gallon . Taxes on gasoline now rangefrom HissouWs two cents per gallon to the nine cents per gallon in Louisiana_ The weighted aveng eua►re gasoline tax in 1939 was 3.96 cents per gallon and by 1950 this average had increased to 4 .65 -.nts_

Seven states have mcr rased gasoline taxes this year and two states have reduced their rate of tax .Comparison of the 1939 and 1950 state rates is shown in Table 7 .

The Federal tax on gasoline was one cent per gallon in 1939 and oneand-onehalf cents per gallo nin 1950. The Revenue Act of 1951, being considered at the present time, mould increase the Federaltax by one-half cent per gallon .

Table 7

STATE G_ASOLIl~'E TAX RATESAs of Jn1T 1, 1939, and December 31, 1950

Raw I*e cas~ .a Raw Per cfWt Jain I, IM

Dowmaw 22. Im StNe Job r. I=

D~ ii. Ifds

Alabama 6

6t 'Nebraska 5fAriaooa 3

3 Nevada 4 5.5Arkansas 6.5 New Hampshire 4 4California 3

4-5 New Jersey 3 3Colorado 4

6 New Mexico 5 ZCoanectieat 3

4 New York 4 4Delaware 4

3 North Carolina 6 7Florida ?

I North Dakota 4 46

'f Ohio 4 4Id0ahom a

6 Oklahoma 4 65Illinois 3

3 Oregon 5 6Indiana 4

4 Pennsylvania 4 5IGrra 3

-

4 Rhode Island 3 4Kansas 3

5 South Caroli a 6 7Kentucky 5

i South Dakota 4 4Louisiana i

9 Tennessee i 7Maine 4

6 Texas 4 4Maryland 4

5 Utah 4 4Massachusetts

3

3 Vermont 4 5Michigan 2

3 Virginia 5 6Minnesota 4

5 Washington 5 6.5Mississippi 6

+ west i irginia 5 5Missouri 2

2 Wisconsin 4 4Montana 5

6 Wyoming 4 4&These rates are exclusive of license and inspection fees_ Taxes on gasoliae used in moto r

vehicles not operated on the public highways may be at a different rate, exempted, orrefunded.

Source : Commerce Clearing House .

- CollectionsIn 1939, collections from the motor fuel tax accounted for almost 26 percent of total state tax

yields . This was the largest revenue-producing tax at that time . By 1950, receipts from this tax amountedto approximately 19.5 percent of tot:.l state tax collections and the general sales tax replaced it as theleading revenue producer. Motor fuel tax collections, although increasing substantially, did not shov eas startling a rise since 1939 as did the other major tax collections . State collections in 1939 averaged$16 million and in 1950 the average state collection was $32 million . California, with $138 millioncollected in 1950, leads thestates in this respect, while the 43 .6 million collected by Nevada was the

14

^smallest amount collected by any state. It is interesting to note that California's collections increase dover $90 million despite a mere one-and-one-half cent increase in rates during the corresponding period .

The Federal government collected $238 mullion, or 5-37 percent of its total tax revenue, from moto rfuel taus in 1939 ; and *604 million, or 1.66 percent of its tax collections, in 1950 .

Table 8 presents state motor fud tax collections in 1939 and 1950.

Tilde 8

STATE KOTOR FM SALES TAX COLLEMONS BY STATEFssed Years 1939 and 1950

(1Lonsaads)

slow > ». > .~..

Total #191 .111 i1,Sti,4T4 Yoatana ;.509 9,847Nebraska #11,551 $23,439

Alabama 14.360 2901

-= Nesada 1,255 3,618Arissaa 4.2:8 10.151 :Ness Hampshire 3,3:1 4x5 3Arkansas 10,316 2!WM Nessierseir 22273 32.47ZCalifornia 47;513 135,826 New Yezk9 4,109 13,315Colorado 7;599 20,S59 New York 67201 "PsConnecticut 9.450 MW 'North Carolina 23252 52„536Delaware 2"6 4,201 North Dakota 2;542 4,756

-

Florida 23A" 5I .205 Ohio 31,106 76,193Gewgia 20;530 45,356 Oklahoma 14.= 36,393Idaho 4,401 10,168 Oregon 10,107 25.43 4Illinois 39.0" 56,339 PennsyICania 56.192 100,399Indiana 2SA85 40,040 Rhode Island 3.910 6=4Ioa 13,683 27,3 South Carolina 11.768 25,249Kansas 10w 26.121 South Dakota 3436 6,388Ketttockf 12,

1 35.152 Tennessee 19.1 :0 41 .MLouisiana 1;,506 4°_158 Texas 44,217 76.432

J

Maine SA03 I2~89 Utah 3.22 7;696Xar7lattd 10.3:3 23,117 Vermont 2A" 4,632Ncssachusetts

220.455_

.T,900 t'"cginia ITr- 42.728Michigan -28,421 46,8:1 siashington 15.314 3T,333Minnesota 17.921 34.193 West Virgins 9.5220 16,5783tississippi lo ;%" 23,361 Wisconsin 19.56; 31 .455liissoart 12,103 19,500 Wyoming 2;571 4,951

& Data are for fiscal years ended :n the calendar year; data are only roughly comparable titlecollections in later years becarse of revisions in reportin[ by the Department of Commerce -Includes all U"I shares of state-imposed taxes.

s Data are for fiscal years ended in 1 :-month preod endinir Jrze 30. lacicdes only those localsham of state-imposed taxes sh ack are not locally collected and retained. Data are pre-liminary ; __ :&et to possible limited revision -

_ Source : Departmtnt of Commerce . -

Rates and CollectionsThe increase of $753 million from motor fuel tax collections between 1939 and 1950 was substantial ,

but not comparable to the relative increases which other major taxes have shown . The 95 percent increaseis the lowest of any of the seven major taxes examined here and far below the 157 percent increase fo rtotal state tax collections excluding unemployment taxes. Collections for the 22 states having the sam erate of tax in 1950 as in 1939 rose 66 percent . If the increased consumption reflected by this collectio nincrease is representative for the remaining 54 percent of the states, then 31 percent of the total increas ein collections was attributable to rate increases while 69 percent was due to factors other than rat echanges. This minor role that rate changes played in influencing collections is further borne out by th efact that the weighted average state motor fuel rate in 1939 was 3 .96 cents and in 1950 this weightedaverage rate was 4.65 cents while motor fuel consumption increased from 23 billion gallons in 1939 t o41 billion gallons in 1950. Thus, the weighted average state motor fuel rate increased by only 17 percen twhile consumption- increased by 74 percent.

15

TOBACCO TAXESTu Rates

Of the various tobacco taxes, the cigarette tax is by far the most important This tax has rapidlygained in popularity and by 1950.40 states had adopted it, compared with the 25 states which were usingit in 1939. Only eight states—California, Colorado, Maryland, Missouri, North Carolina, Oregon ,Virginia, and Wyoming—do not levy a tax on the sale of cigarettes . In addition to the 15 states whichadopted the tax since 1939,14 others increased the rates of this tai . Only one, Arkansas, decreased itsrate. The unrreighted average rate of tax for the 25 states imposing it in 1939 was ;.027 per pack: Theunrreighted avenge rate for these same states in 1950 was ;.036 per pack. The 1930 unweighted averagerate for the 15 states imposing the tax after 1939 was $ .032.

Fire states have increased the rate of their cigarette taxes this year, but one has been restraine dby a temporary injunction_ Two states have adopted a cigarette tax this year, but the operation of on eof these has also been restrained by an injunction. State cigarette tax rates are Iisted in Table 9.

The Federal tax on cigarettes in 1939 was $.06 per pack ; in 1950 it was ;.07 per pack The RevenueAct of 1951, currently under consideration, mould increase the Federal cigarette tax by one cen tper pack-

Table 9

STATE TOBACCO TAX RATESa

As of July 1. 1939, and December 31, 1950

Stata

claw"tte tier Taeaate et UP

Ja$ 1. ISIS

DeeemAer 31. ISIS State

chreman the raelaae at 281 6

Jab 1. ISIS

Dseaawlxr 31 . ISSB

Alabama 3t

3t 'Nebraska – 3tArizona 2

2 Nevada 3Arkansas 5

4 'Neer Hampshire 3t 3eCalifornia –

– New Jer-- ey – 3Colorado –

– New Mexico – 4Connecticut

2

3 New York 2 3Delaware –

2 'North Carolina – –Florida –

5 'North Dakota 3 5Georgia 3

5

- Ohio 2 2Idaho –

3 Oklahoma 3 5

-Illinois –

3 Oregon – –Indiana –

2 Pennsylvania 2

= --" _

4Iowa 2

2 Rhode Island 2 aKansas 2

3 South Carolina V4 5Kentucky 2

2 South Dakota 3 3Louisiana 4

8 _

Tennessee 3Maine –

4 Texas 3 4Maryland – Utah 2Massachusetts

2

-5 Vermont J

2 4

`Michigan 3 Vrginia – –Minnesota –

4 Washington 2 4Mississippi 4

4 West Virginia – 1Missouri –

– Wisconsin – 3Montana –

2 Wyoming – –

a in addition to these rates. there arc special taxes on wholesalers and retailers .6 Rate on most common size. Many states use graduated rates based on site or weight.a IS% of retail price.

Source : Commerce Clearing House .

16

ColleetiomIt is apparent that tobacco taxes are becoming more and more popular with the states . Collections

from this source increased by a far greater proportion than those from any of the other major taxes . It I S

interesting to note, however, that ten states-Alabama, Arizona, Iowa . Kentucky, Mississippi, NewHampshire, Ohio, South Dakota, Tennessee and Utaltshowed no increase m -rates but their collections

_increased X37 million, or 180 percent.

In 1939, state tobacco taxes accounted for 1 .92 percent of total state tax yields while the Federa lgovernment collected 13.11 percent of its tax revenue from this source. In 1950, tobacco taxes con-stituted 524 percent of state revenues while 3 .66 percept of Federal tax receipts were obtained fromthis source. It appears that while tobacco taxes are gaining in popularity with the states, their relativ erole is declining in importance in the Federal tax structure, due not to a decline in tobacco tax collections ,but rather to an upsurge in other tax collections.

Federal tobacco tax collections increased b) almost $1 hiillion from 1939 to 1950 but this increas ewas relatively insignificant compared with the $32 billion increase in total Federal tax collections durin gthis same period .

Table 10 lists state tobacco tax collections .

Table 10

STATE TOBACCO SALES TAX COLLECTIONS BY =STATEFiscal Years 1939 and 1950

(Thousands)

stase ism

ism State Ism in"

TOW X8,m

$414,365 Montana - $ 1,34 1Nebraska - 3,860

Alabama 3,156

7,615 Nerada - 747Arizona 612

1$15 Near Hampshire - 2,441

_Arkansas 1,410

4,635 New Jersey - 17.7187Connecticut %572

7,618 Nerr Mexico - 2,=Delaware --

1,036 Netr York - 56,684Florida -

8,706 North Dakota 5

499 2.717e

Georgia 2,:61

121690 Ohio 7,813 18,144Idaho -

1,645 Oklahoma 2,144 10,390

Illinois 28,328 Pennsylvania 11,159 42,759Indiana -

12,6i 8e Rhode Island 173 3,102- Io"ra _

1,783

4,961 South Carolina 2,369 5,859Bans 1,228

4,929

'Q South Dakota 576 1,723-'

Kentucky 1,587

4,W Tennessee 2,524 8,511Louisiana 4,522

18,126 Texas 6,903 23,532_

Maine -

5,142 Utah 325 869Massachusetts

11209

25,930 Vermont 348 1,807_Michigan -

22,598e Washington 1108! 001Minnesota -

11,123 West Virginia 28 2,057Mississippi 2,313

6,774 Wisz-onsin - 9,950

Js Data are for fiscal years ended in the calendar year ; data are only roughly comparable withcollections in later years because of revisiocs in reporting by the Department of Commerce.Includes all local shares of state-imposed taxes .

t.Data are for fiscal years ended in 12-month period ending June 30 . Includes only those localshares of state-imposed taxes which are not locally -collected and retained- Data are pre-liminary.

c Includes related license taxes .Source : Department of Commerce.

17 -

-

i .

Rates and Collections

State tobacco tax collections in 1950 were more than seven times as great as the 1939 collections .This was the largest proportional increase of any of the seven major taxes under consideration . Everystate levying tobacco taxes more than doubled its collections during the period between 1939 and 1950 ;and even Arkansas, which reduced its tax rate by 20 percent within this period, collected 229 percen tmore revenue in 1950 than it did in 1939 .

In 1939, 168 billion cigarettes were withdrawn for consumption . By 1950, this figure had increase dby 111 percent and 355 billion cigarettes were withdrawn for consumption . In the ten states which madeno rate changes during this period, collections increased 180 percent . These comparative figures wouldindicate that much of the increase in collections was due to greater consumption of cigarettes .

Tobacco tax collections for the states totaled $59 million in 1939 and $415 million in 1950 whil eFederal collections increased from $580 million in 1939 to $1,328-million in 1950 .

ALCOHOLIC BEVERAGE EXCISE TAXES

Tax Rates

Taxes on the sale of alcoholic beverages are imposed by all states permitted to do so by their con-stitutions. In 1939, Kansas, Mississippi, and Oklahoma were dry states, but by the end of 1950, Kansa shad voted itself out of this group. All states levied taxes on the sale of beer in 1939 and in 1950 . The

=average beer tax in 1939 was $.059 per gallon and rates ranged from the $ .02 per gallon in California ,Illinois, Missouri, Nevada, and Wyoming to the $ .213 per gallon in Mississippi . In 1950, the average'tax on beer was $104 per gallon . California, Missouri, and Wyoming still maintained a $ .02 per gallonrate of tax, but the maximum rate had increased to $ .45 per gallon as levied by South Carolina .

In 1939, the average excise tax on distilled spirits, exclusive of states having liquor monopolies ,was $1.01 per gallon while by 1950 the average rate had increased to $1 .53 per gallon.

These average rates for beer and distilled spirits do not include Kansas' two percent enforcementtax which was in effect on all alcoholic beverages in 1950 . They do not include the one-and-one-hal fpercent excise tax or the 23 percent additional surtax on distilled spirits levied in 1950 by Massachusetts ;

_nor do they include South Dakota's 10 percent tax upon the gross receipts from all sales of intoxicating

-alcohol and high point beer which was effective both in 1939 and in 1950.

Seven states have increased alcoholic beverage taxes in 1951 while reductions in these taxes havebeen effected in two states .

From 1939 to 1950, taxes on alcoholic beverages imposed by the Federal government increasedfrom $225 to $9.00 per gallon of distilled spirits, from a range of $ .054.20 to a range of $ .15-$2.00 foreach gallon of wine, and from $5 to $8 per barrel of beer .

The Federal government is considering an increase in the tax on beer of $1 per barrel ; the taxon wines of $ .02 to $ .25 per gallon ; and the tax on distilled spirits of $1 .50 per gallon .

Table 11 lists the various state excise taxes on alcoholic beverages .

Collections

Tax collections from the sale of alcoholic beverages increased $246 million from 1939 to 1950. Thiswas an increase of 141 percent . Revenue from these taxes in 1950 ranged from New York's , ,$45 millionto the $ .5 million collected by Nevada .

18

Table 11

- -

STATE ALCOHOLIC BEVERAGE TAX RATES a

As of October 31, 1939, and December 31, 1950

0cleb" al . IM Daeeeeler 31. ISM

twee 301wt.eaDWE"spkift now star wwe niffito"

sahib

-

(Per Gallon)Alabamab _05 01 0i 05 cm Ol

Arizona .050 $ .24 $ .80 .076 S .W $L20--Arkansas .156 150 1.12 161 75 2-60California .020 .01.02 W .020 .01:02 .80eColorado 030 42-24 L60

_030 12-24 1.60

Connecticut 032 .10-26 .60e .032 10-25 1.00Delaware ` .032 .40 1 .00 .032 25 -1.00Florida .070 20 170 240 100 2.174

=

Georgia .145 .40:60 1 .00 .290 L00-2 .00 1 .001Idabob 060 lbt tb) AW 01 1101

Illinois 020 .10-26 150 040 .15-10 1.00Indiana .010 .25 100 088 .40 3.0 6Iowab .040 nt 1W 080 tbi 1101

Kansas 080 10 )a 1001 1540r 1 .00e• rKeutaeky 048 M 1.04 .048 25 -128Louisiana 048 .05--i0 100 .392 Al-.0 1158Maineb _160 .50 2.08 .160 )b) 1st

Maryland .025 20 110 030 20 125Massachusetts .032 .10 .95 .065 30-.60 2.259Michiganu .040 .50 (bi .040 .50 ib i

Minnesota .0651 .10-.60 --1.00 .071t 22-122 275Mtsstsst

i<P 2131 (e) )e) .4217 (el (e)

Missouri .020 00 .020 029 .10 .80Montanab

.032

n)'

o)

032

ib)

a)

__ .

-

a In addition to these rates, there are special taxes on manu -facturers, processors and dealers . and on components of bev-erages . In some states, brandy, vermouth. sparkling trines, orother specified beverages are taxed at different rates fromgeneral liquors and wines, and these rates are excluded .W here beverages (particularly malt beverages) sold in con -tainers of less than one gallon are taxed at a higher rate ,these rates are excluded . Rates on wines of more than 21 %alcohol are excluded . Rates on beverages manufactured inthe state are excluded when these rates differ from rates o nimported beverages .

b Honopoly state; receives revenue through markup .cDistilled spirits in excess of 100 proof taxed at a highe r

rate.d Distilled spirits in excess of 48% alc .hol taxed at $4.34 .e Dry state.

Enforcement tax ;±f 2ha .19

Nebraska

03 .5

A5,40

.80

.040

290-.55 - -

1.00

Nevada

.020

.10-20

.40

.030

.15-25

.80

New Ham ire'►

.097

)bi

n)

_09?

tbi

ON

New Jersey-

.033

.10

1 .00

.033

.10

1 .50

- New Mexico

.048

24

1.20e

.045

24

1.20e

New York

.033

.10

1.50

.0.33

.10

1.50North Carolinab

.-- .097

.10-.30

1b)

242

.60

(b)

North Dakota

.080

.10:40

.60

1201

.50-.80

2.50Ohiob

.0811

130-.60

(►)

.0811

.12-.30

(►)

Oklahoma*

.065

(e)

(e)

226

W

)d

Oregon

.042

1040

)b)

.042

9-3

(b )

Pennsylvania►

.040

.30

L00

.080

.30

1.00

Rhode Island

.032

.05

.50

.032

.20

1.00

South Carolina

.150

.30

.96

A50

.90

2-52South Dakota-

.065=

15-.60

.75

.06.32

1 :x.60

75

Tennessee

.055

.25

70

.110

70

2.00

Texas

.040

.10-.20

.96

.165'

.11- 22

1.41

Utahb

.05210

lb)

(b)

.129:

(b)

Ib )

ltermontb

.100

.10-1 .00

2.00

.150

.15-1 .00

3.60

Virginiab

.089

(b)

1b)

- .100

.35

1b )

Washington

.0.32

.10

(b)

.032

.10

/b)

West Virginiab

.044

lbi

lb)

.089

/b)

lb )

Wisconsin

.032

.05-10

1 .00

.032

.10 20

2.00

Wyoming-

.020

24

.80

.020

.24

.80

;:Plus excise tax of 1 .55e of net income attributable to th esalr of alcoholic beverages or 1 :20 of 1 1 c of gross receipts.whichever is more, of certain corporations, organizations an dassociations, plus 237. additional surtax thereon .

b Beer not over 3 .2 1:-, alcohol . $ .032.1 Beer not over 3 .25, alcohol. $ .035 .1 Beer rate also applies to wine under 4-7. alcohol .k Beer not over 4';- alcohol . $ .03.% Beer not over =1. alcohol, $ .048 .

-In addition to all other taxes, a tax of IOre is imposed upo nthe gross receipts from all sales of intoxicating liquor andhigh point beer.

a Beer not over 3 .25, alcohol, $.056.a Beer between .5-, and 45, alcohol, $ .040 .nBeer not over 3 .2 alcohol, $426 .

Source : Commerce Clearing House .

Although receipts from state alcoholic beverage taxes increased, they declined slightly in importanc ein the total state tax collection picture . In 1939, these taxes accounted for 5.67 percent of total statetax revenues, but by 1950, collections from alcoholic beverage taxes were 5.32 percent of the total stateyield.

The Federal government collected $2,219 million is 1950 in elcoholic beverage taxes or 6 .1. 1 percentof total tax collections compared to $588 million or 1329 percent of 1939 collections.

Table 12 lists the state alcoholic beverage excise tax collections.

-

Table 12

STATE ALCOHOLIC BEVERAGE SALES TAX COLLECTIONS, BY STAT EFiscal Years 1939 and 1950

_

(Thousands)

srw

»»a

tssa

saw

tsss.

tssa

Total $174,519 $420.694Mon u $ana 1, 2485

Alabama 299 1.136 Nerada 180 510Arizona 662 _ 1.795 New Hampshire 596 1.024Arkansas 1,504 -4.896 New Jersey 8,546 14,625California 9,854 16,145 New Mexico 647 1.305Colorado 2,097 3,640 New York 34,246 45.018Connecticut 2,931 5,314 North Carolina 11760 8,198Delaware 555 883 North Dakota 946 3.105Florida 3.772 22.620 Ohio . 17.660 30,170Georgia 2.802 17.390

= -

Oklahoma 692 ` 4,502Idaho

_225 842 Oregon 599 1.195

Illinois 9.472 `22.966 Pennsyirania 14,192 40.984Indiana 4,242 12.265 Rhode island 356 -

1.710-

Iowa 1.410 3,310 South Carolina 2,315 13,441Kansas 509 5,33'1 South Dakota 1,219 2.552

y 3.346 9.483 Tennessee 807 7,80 8Louisiana 2,791 16.084 Texas 5,682 13,249Maine 1,072 2.056 Utah 113 747Maryland 3.625 5,875 Vermont 878 2,553--

Massachusetts 5.345 20.567 =Virginia 1 1449 6,917Michigan 4.401 6,916 Washington 2,054 1,948Minnesota 4.910 13 .481 West Virginia 950 2.083Mississippi 623 2,311 Wiseorstn 5,513 11,179Missouri 4,138 5,518 Wyoming 329 553

Data are for fiscal years ended in the calendar year ;. data are only roughly comparable withcollections in later years because of revisions in reporting by the Department of Commerce .Includes all local shares of state-imposed taxes .

a Data are for fiscal years ended in 12-month period ending June 30 . Includes only those localshares of state-imposed taxes which are not locally collected and retained. Data are pre-liminary.

a Includes related license taxes.Source ; Department of Commerce.

Rates and ColleefiionsAlcoholic beverage excise tax collections were $175 million in 1939 and $421 million in 1950 . This

increase was prcportionately less than was the increase in total tax collections. The increase in theformer was 141 percent while total state tax collections increased 157 percent . The 141 percent increasein state receipts compares with a 277 percent rise in corresponding Federal collections .

In 1939, $3,630 million was spent for alcoholic beverages. By 1950, this figure had risen to $8,760million, an increase of 141 percent . Sines ~ :.ka tax collections increased by the same percentage : :::iswould indicate that a relatively_3t1±' .-portion 'of the increased yield on the state level was due t orate changes.

-

20

MOTOR VEHICLE TAXES

-Tu Rates

Taxes on motor vehicles were imposed by all the states in 1939 as well as in 1950. A "mparison ofthe 1939 and 1950 rates is extremely difficult because many states formerly having a flat fee now levya tax based upon horsepower or weight Slightly over onelialf of the states made no change in the rate ,while many others made only minor changes.

The Federal government imposes no tax on motor vehicle registration, but it does levy a tax on themanufacturer's selling prime This tax was three percent in 1939 and seven percent in 1950 .

As table 13 shoes, the general state trend was one of slight incresses, but not comparable t oincreases in other major tax rates.

Collections

-Collections from state motor vehicle and operators' license taxes increased from $358 million i n

1939 to $756 million in 1950, an increase of 111 percent . Despite this increased yield, collections fromthis source, which had accounted for approximately 11 .5 percent of total tax collections in 1939, yieldedonly nine-and-one-half percent of the total state collections in 1950 . The $79 million collected by NewYork was the highest sum collected by any state in 1950 from motor vehicle and operators' license taxes,

while Idaho's $1 million was the smallest amount collected .

In 1939, Federal receipts from motor vehicle taxes totaled $49 million or 1 .10 percent of total taxrevenue, while in 1950 these receipts amounted to $576 million or 1 .59 percent of total collections. The

collections data for the states are listed in table 14. -

Rates and CollectionsAlthough taxes on motor vehicles yielded more than twice as much in 1950 as in 1939, they accounte d

for a smaller proportion of total state tax revenue . On the other hand, 1950 Federal receipts from thesetaxes were almost 11 times as great as the 1939 collections, but their share of the total Federal ta xyield only increased from 1.10 percent to 1 .59 percent.

Registration of motor vehicles, excluding those publicly owned, increased by 58 percent from 1939to 1950. This increase indicates that the rise in collections from motor vehicle taxes was not due entirel yto rate increases but that the greatly increased use of motor vehicles also had a significant effect upon _

this increase.

21

Table 13

STATE PASSENGER CAR FEESAs of July 1, 1939, and December 31, 1950

Elise Job 1, last Decenbw 31, INS

Alabama $5 .00 to $1800 $5.00 to $18.0 0Arizona $3 .50 $3.50Arkansas 6.25E per h .p. plus 27.50 to 32.50 per cwt, 625E per h.p. plus 27.50 to 32 .50 per cwt.California $3 .00 S6-WColorado -$7.00 to $11.00b =200 to $11 .00►Connecticut $5 .00 to $7.85 plus 600 per cwt. $5.00 to $7.95 plus 600 per cwLcDelaware $1 .50 per SW lbs. to 5,000 lbs. ; $200 per SW

lbs. thereafter $8.00 to $12.0 0Florida $5 .00 to $20.00 $5.00 to $25-00Georgia $1 .50 plus $1 .00 per 500 lbs. over 2,5W lbs. $1 .50 plus $1 .00 par500 lbs. over 2,500 lbs.

$5.0 0Illinois $6.50 to $22.00 $6.50 to $22.00Indiana $5 .00 to $10.00 $7.12

=Iowa 4Jf per cwt a 40e per cwt_dKansas :400 plus 250 per cwt. over 2,000 lbs. $6.50 plus 350 per cwt. over 2,000,"mKentucky $4.50 54 .50 *Louisiana 48e to 680 per h.p. ; $7,50 minimum- $3 .00Maine< 25E per h.p. plus 250 per cwt. $10.00 to $16.00Maryland 32E per h.p.; $10.00 to $23.0 0Massachusetts $3 .00 to $7.50 $3.00 to $25.00kMichigan 35e per cwt. 350 per -art _Minnesota 225c of value! $7.50 to $75.00Mississippi 10E per h .p. plus 300 per cwt n 10e per h.p. plus 300 per cwt'Missouri $5 .00 to $3250 -

$5.00 to $37.50

=Montana $5 .00 to $10.00 $3.00 to $32.0 0Nebraska $3.00 to $5 .00 $3.00 to $5.00Nevada $5.00 $5.0 0New Hampshire 350 to 60f per cwt. 350 to 600 per cwt_New Jersey .10E per h .p. up to 29 h.p. ; 50f per h.p. thereafter

40e per h .p. up to 29 h.p. ; 500 per h .p. thereafterNew Mexico $5.50 to $20.00 $5.50 to $20.00New York 50e per cwt. to 3,500 lbs. ; 75f per cwt. there-

500 per cwt. to 3.500 lbs. ; 75f per cwt. there-after after

-North Carolina 35G per cwt. $10 .00 to $15.00North Dakota $12 .50 to $150.00k $15 .50 to $187.50 kOhio $7.00 to $16.00 $10.00Oklahoma $12 .50 plus $1 .50 per $100.00 over $600001 $19.00 plus $1.50 per $100.00 over $600.00Oregon $5 .00 $10.00Pennsylvania 40e per h .p. $10.0 0Rhode Island $8.00 to $23.00 38.00 to 523.00South Carolina $1 .00 plus $1 .00 per 500 lbs . over 2,000 lbs. $1 .00 plus $1 .00 per 500 lbs . over 2,000 lbs.South Dakota $3.00 to $75.00= $3.00 to $75.001Tennessee $7.50 to $10.00 $7.50 to $10.0 0Texas 28e to 50f per cwt. 28e to 500 per cwt aUtah $5 .00 $5.00Vermont $12.00 to $33.00 $14 .00 to $22.00Virginia 40e per cwt. 30e per cwt.Washington- $3.00 $3,00West Virginia $11 .00 plus 60e per cwt. over 2,000 lbs . $11 .00 plus 600 per cwt. over 2,000 lbs.Wisconsin $2 .00 to $48 .00 $16.0 0Wyomingo $5.00 $5,0 0

• Plus 2% of value. J Annual 10% reduction.A Plus specific ownership tax .

_ k Fees lowered with each registration .e Plus 3% of value. l Excise tax of 2% at first registration .d Plus 1% of value .e Plus use tax of 3%.

m Excise tax of 3% at first registration .r Excise tax from .023% to .003^c also imposed.

a Plus sales and use tax of 1!"c .e Plus 1% tilling tax on newly registered vehicles. o Excise tax of 1 .5

-`;e also imposed .A Plus excise tax. P Plus county fees based on valuation .t Value reduced 10% each registration . Source : Commerce Clearing House.

22

0

Table 14

STATE MOTOR YEIRCLF AND OPERATORS' LICENSE

COLLECTIONS BY STATE _

= -

= _

- Fiscal Yzm 1939 and-1950

r, -

(Thousands)

sate ims, 1!s» state ism in"

Total X58,325 $N6,044 Montana $ `zoo $ 1,933_ Nebraska 812 4,559

Alabama 3,258 6,902 Nevada 277 1,458Arizona 1,022 3,045 New Hampshire 2,883 3 1816Arkanscs 3,118 71834 New Jersey 19,918 36,215California

_13,116 53$W New Mexico 1,814 5,151

Colorado _

2,426 61161 _ New York 46,666 78,558-

Connecticut

6,510 _ 10,487 ° North Carolina 7,970 18,087Delaware =

1,177 1 1685 North Dakota 1,460 5,928-

Florida 6,736 22,819 Ohio 26,926 45,0;8Georgia 2,172 "5,642 Oklahoma 5,550 19,405Idaho 406 845 Oregnn 2,817 15,28 6Illinois 23,507 41,248 Pennsylvania 34,871 53,932

_ Indiana =

10,102 22,844 Rhode Island 2,895 4,562Iowa

= 11,608 22,680 South Carolina 1,717 4,776Kansas 4,040 14,340

_ South Dakota 845 2,040Kentucky 3,545 8,042 Tennessee 4,454 12,372Louisiana 5,232 6,797 Texas -8,543 26,205Maine 3,681 6,316 Utah 1,149 2,584Maryland 4,585 13,134 Vermont 2,469 3,948Massachusetts

7,183 11,184 Virginia 6,721 12,753Michigan 22,034 42,235 Washington 3,168 -

12,283Minnesota 9,445 21,687 West Virginia 4,904 9,140Mississippi 250 2,896 Wisconsin 13,183 24,123Missouri 10,214 17,019 Wyoming 648 2,220

aData are for fiscal years ended in the calendar pear; data are only roughly comparable withcollections in later years because of revisions in reporting by the Department of Commerce.Includes all local shares of state-imposed taxes . b.

b Data are for fiscal years ended in 12-month period ending June 30. Includes only those local -

-

-shares of state-imposed taxes which are not locally collected and retained. Data are pre-liminary. _

- Source : Department- of Go~tmerce .

L SUMMARY

Revenue from taxes on sales, income, tobacco, motor fuel, alcoholic beverages and motor vehiclesaccounted for 70 percent of total state tax collections in 1939 and for 82 percent of Federal tax receipt sin that year. In 1950, these same taxes contributed 77 percent of the total state tax yield and 90 percen tof Federal collections. (See Table 15) .

Although only imposed by 28 states, the sales tax accounted for 21 percent of total state tax revenu ein 1950 and was the greatest single revenue-producing tax. Motor fuel taxes accounted for almost 20percent of state tax collections in 1950 and income tax collections constituted approximately 17 percen tof the total. In 1939, 26 percent of total tax receipts were attributable to motor fuel taxes, 15 percen tto sales taxes and 12 percent to motor vehicle taxes .

28

In states which have a sales tax, collections from sales taxes accounted for 30 percent of the 193 9total tax yields of these states and almost 36 percent of the 1950 tax yield . In states levying taxes onboth corporate and individual income, receipts from these taxes amounted close to 18 percent of the

=total tax collections of these states in 1939 and over 25 percent of the 1950 total . (See Table 16) .

-

Many states mads no rate changes in the various taxes from 1939 to 1950. Collections, for the statesimposing the same tax at the same rate, increased by 401 percent from income taxes, 259 percent from -sales taxes, 180 percent from tobacco taxes and 66 percent from taxes on motor fuel .

On the Federal level, taxes on income were, and still are, by far the most important revenue pro-ducers. In 1939, income taxes yielded over 49 percent of total tax collections and in 1950 they accountedfor 77 percent of the total.

More detailed information on state and Federal tax collections may be found in Tables 1549 .

Whatever course the Federal government may pursue to equalize its outgo and income—whetherthrough deficit financing or tax increases—the evidence adduced from the trend in state sales ta xcollections does not seriously militate against the use of this type of tax by the Federal government .

}

Table 15

J

STATE TAX COLLECTIONS BY SOURCE_

Amount and Percentage Distribution

Fiscal Years 1939 and 1950

Ins

im

t,

-State Tax Gtlwdeae

FWend Taa Conectieusa

State Tax Ceaeetietr

Fa&nd Tax Catisetiwa

Ameant Percentage

Asaast Percentage

Asenat Pereawtap

Aaseatt peec«tesp(donaab) DistrPostma

(tboman&) DistrUnden

(tMeraais) DistrYatiss

(tisasani) DistriMfias

Total Tax Collections (Ex-cluding Unemployment)

$3,076,387 100.00

$4,421,935 -=100.00 -- 47,911,856 100.00 $36,312,551 10000Alcoholic Sales Taxes

174,51n

5.67

587,605

13.29

42004

5.32

2,219,196

611Income Taxes (Corporation

C"and Individual)

330,899

1076

2,185,114° 49A2

1,310,173

`16 .56

28,007,659

77.13Motor Fuel Sales Taxes

791,161

25.72

237,516c

5.37

1,544,474

19.52 V

604,342e

1.66

4tMotor Vehicle and Operators'

License Taxes

358,325

11 .65

48,7314

1 .10

756,044

9.56

575,6964

1.5 9Sales Taxes

451,213

14 .67

1,670,161

21 .11

—

"

Tobacco Sales Taxes

58,998

1 .92

579,784

13 .11

-414,565

524

1,328,464

3.66All Other Taxes

911,272

29 .61

783,185

17.71

1,795,745

22 .69

3,577,194

8.8 5

& Collections basic ; before-refundsD Includes unjust enrichment tax .c Includes taxes on lubricating oils.d Excludes taxes on parts and accessories for automobiles and tires and tubes .

`Source : Department of Commerce and Treasury Department .

/

y

x-11

_

Table 16 ; F

STATE TAX COLLECTIONS BY SOURCE`-

Percentw-of Total Derived from each Source

=Fiscal Yearn 1939 and 1950

tssa

-lass

- Total Tax Collections,-A11 States $3.076,387 $T.911,=

_

(1) Total Alcoholic Beverage Excise Taxes (thousands) $ 174,519 $ 420,694(2) Total Tax Collections of States Levying Alcoholic Taxes (thousands) $3.076,387 $7,911,856

Percentage Relationship of (1) to (2) -(per cent) 5.67 6.32

3) Total Corporation Income Taxes• (thousands) $ 128,148 $1,961,239(4) - Total Tax Collections of States Levying Corporation Income Taxes+ (thousands) $ 584.767 $4,901,55 1

Percentage Relationship of (3) to (4) (per cent) _ 6.53 11.93

(5) Total Individual Income Taxes' (thousands) $ 196.004 $ 666,057(d) Total Tax Collections of States Levying Individual Income Taxes (thousands) $1,748.071 $4,364,905

Percentage Relationship of (5) to (6) (per cent) 1121 1526

(7) Total Motor Fuel Sales Taxes (thousands) $ 791,161 $1,5!4,474(8) Total Tax Collections of States Levying Motor Fuel Sales Taxes (thousands) $3.076,387 $1,911,85 6

Percentage Relationship of (1) to (8) (per cent) 25.72 19.52

(9) Total Motor Vehicle and Operators' License Taxes (thousands) $ 358.325 $ 756.044(10) Total TaiCollections of States Levying Motor Vehicle Taxes (thousands) $3.076.387 $7,911,856

Percentage Relationship of (9) to (10) (per cent) 11.65 9.56

(11) Total Sales Taxes (thousands) $ 451,213 $1,670,148(12).- _ Total Tax Collections of States Levying Sales Taxes (thousands) = $1,496.498 $4,703,15 6= ]Percentage Relationship of (11) to (12) (per cent) 3015 35.51 :

l,

b_

-_(13) Total-Tobacco Taxes (thousands) $

58,998 $ 414,565

-(14) Total Tax Collections of States Levying Tobacco Taxes (thousands) $1,343,711 $6,248.332

Percentage Relationship of (13) to (14) (per cent) 4.39 6.63

+Excludes corporation income tax collections which are not segregable from individual incom etax collections in Alabama, Louisiana, Missouri and South Dakota . -

Q Excludes individual income tax collections which are not segregable from corporation incom e` tax collections in Alabama, Louisiana, Missouri, South Dakota .

Source : Department of Commerce.

4 - -

25

=

incomelavaas Tear

_

Corpomflon- (Normal Tax Rate) r3%(Surtax Rate) 1Z 3 r' o—I9'Xe

19%

Individual

(Normal T-x Rate) 4% 3%x e

(SurtaxRate) 4%—75. II%—U Xe

As or Ihmabor u As of 1Cenabes 1Alcoholic Beverages

Disti7kd Spirits (Per Proof or Wine Gallon) UZ $9:00Wines (to 24% ale") (Per Proof or Wine Gallon) 5f to 200 15f to $2.00

Fermented Malt Liquor (Per Band) $5.00 $E.0 0

Cigars (Per Pact) 60 to 1440 7? to 16..8 E

Gasoline (Per Galion) if 1 .5E

Motor Vehicle (Sales Price) 21% to 35 see to 7%

-

+The bases to shirk the __rmaI tax and surtax rates apply vary with the deductions pro-visions of the several avenue acts ; Iihecise the brackets to which the rates apply differwith the several revenue acts .

ala the use of ioint returns the net income and exemptions are divided by two, the tax con -pute4 and msitiplied by iso_

eTentative rates subject to redactions :aryia ; from 13% to 7.2% aexordins to size of income;maximum effective rate of individual income tax is 50 'c of net income.

_

Source : Treasury DepartmmL =

-

26

STATE TAX COLLECTIONS BY STATEEulnding Unemploynumt Compensation

Fnad Yaws 1939 and 1950O

SMOG Ism ism save I~fa rssM

,-,.Total $3,0;6,387 371911.556 Montana ; 11 .007 $ 29.797

Nebraska 2: .474 54;070Alabama 41 .750 116.115 Nevada 3.554 10.54Ariaooa 15.85 47.634 New Hampshire 12.445 19.76[Arkansas 20 030 55.067 New Jersey 91.-,N 147.95 6California 242.215 506.300 Xes Mexico 131495 51.168Colorado 31 .360 - 09.315 'New York 316;20? 558.322Connecticut 40.255 - 105.0 North Carolina 69.163 212,38E

-, Delaware. 9.776 25.708 'North Dakota 11

''3 39.022Florida 51 .191 170.323 Ohio

- - 190,3-1 379.396Georgia 42.128 124, 75 Oklahoma 55.721 158.63Idakw 10.143 29.571 Oregon 22,19E 99.184Illinois 183.247 379.765 Pennsylssnia 238.747 438.545Indiana 72.617 20-422 Rhode Island 14.162 39MIowa 61

1 146;060 South C:.tolit a 25.616 $9,915_

T►ansas 36.14 119.291 South Dakota 14.-". 3_,8:6Kentucky 40.157 107.663 Tennessee 40.;-3 149.770Louisiana 70.143 241.653 Texas = `.113=375 317.012Maine 19X I 41AM Utah 25,3 43.394Maryland 35^ 131.008 Vermont 9.553 20.343Massachusetts

10021 233.959 Virginia 47.365 145 97Michigan 139.610 392.123 Washington 57.474 200.840Minnesota 75-S75 18:,118 Rest Virginia 43.616 93 .930Mississippi 27.' 5 07.241 Wisconsin TD- 1649 196.75 4Missouri 691071 161 .704 Wyoming 6.836 17.634

&Data are for fiscal sears ended in the calendar sear ; data are only roughly comparable withcollections in later y.ars because of revisions in reporting by the Department of Commerce .Includes all local shar__ of state-impose : t=,es.

►Data are for fiscal sears ended in 12-month period ending June 30. Includes only those loca lshares of state-imposed taxes which are not locally collected and retained. r-la are pre-liminary ; subject to possible limited revision .

Source : Department of iommerce-

Table 19

STATE TAX COLLECTIONS BY STATE

Including Unemplosm ut Compensation

Pineal Yean 1939 and 1930 -- (Thousands)

skim ism

-rsua run serr ism

Totsl x . .300 x.659 Montana S 13.689 = 33.rS'Yebraska 25AN 56.79 4

Alabama 49.914 128028 'Nerada 4.491 12.469

-

Arizona Y;429 51.458 New Hampshire 13.1:9 24 .102Arkansas 31,M 89.399 \evJersey 133,:08 191 .537California W.566 934.'136 New Mezko 13.4:9 55.226Colorado 36.~U 9'I t0a New Torn S33AI-" 1.096.549Connecticut W.M 118„5-45 2%

Carolina 19.860 230.369Delaware II,981 27.166 'North Dakota 12,34? 40.891Florida 51.300 1',5065 Ohio 247.'30 423.425Georgia 30,99? 13;,988 Oklahoma 61.342 165.473Idaho lu-559 -

33.831 Oregon 29031 111 .41±Illinois 249.136 435,',96 _Pennsylvania 314.49-9 496.485Indiana 92,.'.40 220.5-48 Rhode Island 21 .156 49,20?Iona 69.162 156008 South Carolina 33,06; 97.292Kansas 4LW& 125r.31 South Dakota 16.023 39.244Kentucky 51 .7 93 129.496 Tennes_ree 49039 162.166Louisiana '19.933 251003 Tens 136.113 343x39Maine 23.:83 41.233 =Utah

- 17.992 46.480Maryland 47.739 143.302 Vermont 11 .339 _

21012Massachusetts

144.629 282.V,7 Virginia 51,78 154.641Michigan 116.173 460 Washington 67.533 9'..35.196Minnesota 89.875 1961302 West Virginia 53" 103.334Mississippi 29.431 91„359 Wisconsin = 91 .064

- 210006Missouri 88.68 185.031 Wyoming 8.263 19.307

aDatz are for fiscal gears ended in the calendar -rear ; data are only roughly consparable withco!'eetiors in later years because of revisions in reporting by the Department of Commerce.Includes all local shares of state-imposed taw.

sData are for fseal years ended in l :-month per-ad endin¢ Sure W. Includes on :y those IocaIshares of state-imposed taxes which are not Ioally collected and retained . Data are pre -Iiminary; subject to possible limited revision-

Source. Department of Commerce-