Taxes are a concurrent power, meaning both the federal government and state governments have the authority to impose and collect taxes. This power is established by the Constitution, which gives Congress the power to “lay and collect taxes, duties, imposts, and excises” and also allows states to “levy taxes” within their own borders. As a result, both federal and state governments have the ability to impose a wide range of taxes, including income taxes, sales taxes, and property taxes. However, the federal government has the exclusive power to impose certain types of taxes, such as import tariffs and excise taxes on certain goods, while states have the exclusive power to impose certain other types of taxes, such as property taxes on real estate.
Federalism and Concurrent Powers
Federalism is a system of government in which power is divided between a central government and several regional governments. In the United States, the federal government and state governments share power over many different areas, including taxation.
Concurrent Powers
Concurrent powers are powers that are shared by both the federal government and the state governments. This means that both the federal government and the state governments can create laws and regulations in these areas.
- Taxation is one of the most important concurrent powers.
- Both the federal government and the state governments can collect taxes from individuals and businesses.
- However, the federal government has the power to collect taxes on all types of income, while state governments are generally limited to collecting taxes on income earned within their borders.
| Tax Type | Federal Government | State Governments |
| Income Tax | Yes | Yes |
| Sales Tax | No | Yes |
| Property Tax | No | Yes |
The division of power over taxation between the federal government and the state governments has been the subject of much debate throughout American history. Some people argue that the federal government should have more power to tax, while others argue that the state governments should have more power. Ultimately, the balance of power between the federal government and the state governments is a delicate one that is constantly being negotiated.
## State Taxing Authority
States have the authority to levy taxes under their own taxing powers. This authority is concurrent with the federal government’s taxing power, meaning that both the federal and state governments can impose taxes on the same subject matter.
State taxing authority is derived from the Tenth Amendment to the U.S. Constitution, which reserves all powers not delegated to the federal government to the states or the people.
### Types of State Taxes
States can impose a wide variety of taxes, including:
- Sales tax
- Property tax
- Income tax
- Use tax
- Excise tax
### State Taxing Limits
While states have broad taxing authority, there are some limits to their power. For example, states cannot:
- Tax federal property or instrumentalities
- Tax imports or exports
- Tax interstate commerce
### Taxing Authority of Local Governments
Local governments, such as cities and counties, also have the authority to impose taxes. However, this authority is typically delegated by the state government. Local governments can only impose taxes that are authorized by state law.
### Table of State Tax Rates
The following table shows the average state sales tax rate, property tax rate, and income tax rate for all 50 states:
| State | Sales Tax Rate | Property Tax Rate | Income Tax Rate |
|—|—|—|—|
| Alabama | 4.00% | 0.47% | 5.00% |
| Alaska | 0.00% | 1.16% | 0.00% |
| Arizona | 5.60% | 0.62% | 4.50% |
| Arkansas | 6.50% | 0.47% | 6.00% |
| California | 7.25% | 0.79% | 13.30% |
| Colorado | 2.90% | 0.52% | 4.63% |
| Connecticut | 6.35% | 1.17% | 6.30% |
| Delaware | 0.00% | 0.53% | 6.60% |
| Florida | 6.00% | 0.94% | 0.00% |
| Georgia | 4.00% | 0.93% | 6.00% |
| Hawaii | 4.00% | 0.32% | 11.00% |
| Idaho | 6.00% | 0.47% | 6.00% |
| Illinois | 6.25% | 2.42% | 4.95% |
| Indiana | 7.00% | 0.78% | 3.23% |
| Iowa | 6.00% | 0.84% | 9.00% |
| Kansas | 6.50% | 0.88% | 5.75% |
| Kentucky | 6.00% | 0.98% | 6.00% |
| Louisiana | 4.45% | 0.77% | 4.00% |
| Maine | 5.50% | 1.12% | 7.15% |
| Maryland | 6.00% | 1.12% | 5.75% |
| Massachusetts | 6.25% | 1.30% | 5.00% |
| Michigan | 6.00% | 1.92% | 4.25% |
| Minnesota | 6.88% | 1.09% | 9.85% |
| Mississippi | 7.00% | 0.76% | 4.00% |
| Missouri | 4.225% | 0.90% | 6.00% |
| Montana | 0.00% | 0.68% | 6.90% |
| Nebraska | 5.50% | 1.57% | 6.84% |
| Nevada | 6.85% | 0.57% | 0.00% |
| New Hampshire | 0.00% | 2.22% | 5.00% |
| New Jersey | 6.625% | 2.41% | 8.90% |
| New Mexico | 5.00% | 0.72% | 4.90% |
| New York | 4.00% | 1.62% | 8.82% |
| North Carolina | 4.75% | 0.85% | 5.25% |
| North Dakota | 5.00% | 1.23% | 2.90% |
| Ohio | 5.75% | 1.20% | 4.99% |
| Oklahoma | 4.50% | 1.02% | 5.00% |
| Oregon | 0.00% | 0.96% | 9.90% |
| Pennsylvania | 6.00% | 1.45% | 3.07% |
| Rhode Island | 7.00% | 1.21% | 9.70% |
| South Carolina | 6.00% | 0.57% | 7.00% |
| South Dakota | 4.50% | 1.13% | 0.00% |
| Tennessee | 7.00% | 0.84% | 6.00% |
| Texas | 6.25% | 1.83% | 0.00% |
| Utah | 4.85% | 0.62% | 4.95% |
| Vermont | 6.25% | 1.81% | 8.75% |
| Virginia | 5.30% | 1.05% | 5.75% |
| Washington | 6.50% | 1.07% | 0.00% |
| West Virginia | 6.00% | 0.61% | 6.50% |
| Wisconsin | 5.00% | 2.36% | 7.65% |
| Wyoming | 4.00% | 0.59% | 0.00% |
Federal Limits on State Taxes
The federal government imposes several limits on the taxing power of states. These limits are designed to prevent states from interfering with interstate commerce, protect the federal government’s revenue base, and ensure that the tax burden is fairly distributed among the states.
Interstate Commerce
- The Dormant Commerce Clause prohibits states from discriminating against interstate commerce by imposing taxes that favor in-state businesses or products over out-of-state businesses or products.
- The Foreign Commerce Clause prohibits states from taxing imports or exports.
Federal Revenue Base
- The Supremacy Clause prohibits states from taxing federal government property or income.
- The Intergovernmental Tax Immunity Act prohibits states from taxing the income of federal employees.
Fair Tax Distribution
The Sixteenth Amendment gives Congress the power to levy income taxes without apportioning them among the states. This means that Congress can impose a uniform income tax rate on all Americans, regardless of where they live.
The Uniformity Clause of the Constitution prohibits states from imposing taxes that discriminate against residents of other states. For example, a state cannot impose a higher income tax rate on non-residents than it does on residents.
| Limit | Description |
|---|---|
| Dormant Commerce Clause | Prohibits states from discriminating against interstate commerce |
| Foreign Commerce Clause | Prohibits states from taxing imports or exports |
| Supremacy Clause | Prohibits states from taxing federal government property or income |
| Intergovernmental Tax Immunity Act | Prohibits states from taxing the income of federal employees |
| Sixteenth Amendment | Gives Congress the power to levy income taxes without apportioning them among the states |
| Uniformity Clause | Prohibits states from imposing taxes that discriminate against residents of other states |
Concurrent Tax Powers of Federal and State Governments
Concurrent powers are those that are shared by both the federal government and state governments. The power to impose taxes is one of these concurrent powers.
Intergovernmental Cooperation on Tax Matters
- To avoid double taxation and promote efficient tax administration, federal and state governments cooperate on tax matters in various ways:
- Tax information exchange: They share tax information, such as taxpayer identification numbers and tax returns, to prevent tax evasion and ensure compliance.
- Joint tax audits: They conduct joint tax audits to reduce duplication of efforts and improve the efficiency of the audit process.
- Tax treaties: The United States has entered into tax treaties with over 100 countries to avoid double taxation and promote cross-border trade and investment.
- State and local tax conformity: Many states have adopted federal tax laws into their own tax codes, known as conformity. This simplifies tax compliance for businesses and individuals operating in multiple jurisdictions.
| Tax Type | Federal Tax Rate | State Tax Rate (Example: California) |
|---|---|---|
| Income Tax | 10% – 37% | 1% – 13.3% |
| Sales Tax | None | 2.5% – 10.5% |
| Property Tax | None | 0.63% – 2.6% |
Thanks for sticking with me through all that tax talk! I know it’s not the most exciting subject, but I hope I’ve shed some light on the issue of concurrent powers. If you have any more questions, feel free to hit me up again. I’m always happy to chat taxes (or anything else, really). Catch ya later!