In this article, we will take a look at the top 20 states by tax revenue to GDP ratio in the US. If you want to skip our detailed analysis, you can directly check out the Top 5 States by Tax Revenue to GDP Ratio in the US.
Tax Collection in the US
There are various types of taxes accumulated by the states to generate revenue each year. Income and property taxes are two of the most prominent revenue streams for state governments along with sales and gross receipt taxes. In 2023, all the states combined generated over $1.43 trillion in total taxes. The total taxes included property taxes of around $26.04 billion, sales and gross receipts taxes of just under $665 billion, and income taxes of almost $616 billion. Individual income taxes accounted for approximately $472.87 billion and corporate income taxes were around $143.07 billion in 2023. Whereas, other taxes such as license taxes gathered over $68.85 billion in tax revenue for all 51 states combined. Other taxes including death and gift tax, documentary and stock transfer tax, and the remaining taxes accounted for almost $56.13 billion for all the states combined in 2023.
Taxes in the US are imposed by two entities including the federal government and the state government. Each state government has its tax rates for all types of taxes including income, property, and sales. Some states have a flat income tax rate, while others have a progressive tax system or no tax at all. The District of Columbia had the highest income tax revenue per capita in 2023, at around $6,148. The majority of the US states with the highest income tax revenue per capita are those states with the highest tax burden. In 2023, the District of Columbia generated over $10.33 billion in total taxes. Whereas, California, New York, Texas, and Illinois followed the DC among the states with the highest total tax revenues in 2023, with $220.59 billion, $125.18 billion, $86.77 billion, and $62.98 billion, respectively.
On the other hand, the federal government levies income taxes, social security tax, medicare tax, excise tax, customs duties, and estate and gift taxes, among others. Federal individual income tax in the US ranges from 10% to 37%, based on the income of an individual or a household. Alaska, New Hampshire, and Wyoming are three of the least taxed states in the US. For the fiscal year 2024, the federal government has generated more than $2.04 trillion in individual income tax revenue, accounting for nearly 50% of the total tax revenue so far.
The US federal government tax profits on corporate income at 21%, reducing from a previous rate of 35% by the 2017 Tax Cuts and Jobs Act. The federal corporate income tax accounts for almost 10% of the total revenue. In the fiscal year 2024 so far, the federal government has gathered over $413 billion in corporate income tax revenue, against the total revenue of $4.08 trillion. The Social Security and Medicare taxes are the second largest revenue stream for the federal government. The social security and medicare tax revenue is around $1.44 trillion, or 35% of the total tax revenue, as of August 25. As per the IRS, the current tax rate for social security is 6.2% for the employer and 6.2% for the employee. Whereas, the medicare tax is around 1.45% for the employer and 1.45% for the employee. The tax revenue collected by the federal government is used to pay for government activities such as employee salaries, infrastructure maintenance, and goods and services provided to US citizens and businesses.
In 2023, the total revenue generated by the US government was around $4.44 trillion, with the tax revenue to GDP ratio of over 16%. The tax revenue to GDP ratio has improved in the last few years, rising from 11.3% and 12.2% in 2021 and 2022, respectively. The US government is making moves to improve its tax collection. In September 2023, the IRS announced plans to expand its scrutiny for millionaires and collect more than $250,000 in recognized tax debt from millionaires.
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Intuit as a Tax Service Provider
Intuit Inc. (NASDAQ:INTU) is a top-tier tax services provider and a diversified SaaS company that has over 100 million customers worldwide. TurboTax, Credit Karma, QuickBooks, and Mailchimp are some of the top products of the company that offer a wide range of financial services. The company is making a significant investment in AI. On July 25, the company announced that it has appointed a new AI leader, Forrest Norrod, who is executive vice president and general manager of the Data Center Solutions Business at AMD. Norrod brings extensive experience in data, AI, and GenAI, working in AMD. Norrod has also held various leadership and engineering positions at Dell. Norrod has assisted and led AMD through the ongoing AI transition, adding to the company’s data center growth and open AI ecosystem strategy. During the Q4 2024 earnings call, Intuit’s management emphasized its AI-driven strategy and how it has helped its platforms to grow. Here are some of the comments from the Q4 2024 earnings call:
“We made an early bet on AI. We have a significant advantage with the scale of our data, investments in AI capabilities such as knowledge engineering, machine learning, and GenAI, and our large network of AI-powered virtual experts. This is enabling us to disrupt the categories in which we operate. We are transforming how we serve our customers by delivering done-for-you experiences, where we do the hard work for them, connecting them with AI-powered human expertise to fuel their success. With the introduction of GenAI, we are now delivering reimagined customer experiences and bolstering businesses’ growth potential, while driving efficiencies in how work gets done within Intuit. This has enabled us to build our large AI-driven expert platform to fuel the success of consumers, and small and mid-market businesses.
The progress we’ve made has bolstered our confidence, leading us to accelerate investments in five key areas within our Big Bets to deliver greater impact in the future. I’ll spend a moment unpacking the progress we’ve made and our investment plans for the future: First, within Big Bet 1, we are delivering done-for-you experiences with Intuit Assist. In fiscal year 2024, we made strong progress making Intuit Assist, our GenAI-powered financial assistant, available to millions of consumers and approximately 1 million small and mid-market businesses. We are accelerating our investments to roll out Intuit Assist at scale in the coming year. Second, within Big Bet 2, we are accelerating platform and go-to-market investments for TurboTax Live and QuickBooks Live, embedding AI-powered experts across our business offerings.”
Intuit Inc. (NASDAQ:INTU) has once again surpassed earnings estimates. On August 22, the company posted its earnings results, reporting an EPS of $1.99, giving an earnings surprise of 7.41%. The revenue came in at $3.18 billion, beating estimates by $96.75 million. In FY2024, TurboTax Live revenue soared 17% year over year, and full-service customers doubled while those new to TurboTax tripled. QuickBooks Live customers also more than tripled and QuickBooks Online accounting revenue increased 17% in Q4 and 19% in FY2024.
Intuit Inc. (NASDAQ:INTU) is accelerating international growth with Mailchimp and QuickBooks. The company has added five different languages to Mailchimp for markets where there is a large Total Addressable Market. In addition, Intuit is bringing QuickBooks and Mailchimp together to create a single growth platform and penetrate in the markets where the company has product market fit, including the UK, Canada, and Australia. With global expansion and AI development, INTU projects a double-digit revenue growth and margin expansion in FY2025.
INTU isn’t a cheap stock despite an increase in its earnings and further expected increase in earnings. INTU is currently trading at a 53% premium to its sector. INTU is expected to earn $19.28 per share in fiscal 2025, with a growth of 14% from fiscal 2024. Analysts are bullish on the stock and have a consensus Buy rating. The average price target of $740 implies an upside potential of almost 19.38%, as of August 26.
While we acknowledge the potential of INTU as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than NVDA but trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Now, let’s take a look at the top 20 states by tax revenue to GDP ratio in the US.
Top 20 States by Tax Revenue to GDP Ratio in the US
Our Methodology
To compile the list of the top 20 states by tax revenue to GDP ratio in the US, we obtained total tax revenue and GDP data for each state from the US Census Bureau. To find the tax revenue to GDP ratio, we divided the total tax revenue with the GDP of each state. The top 20 states by tax revenue to GDP ratio in the US are ranked in ascending order of their tax-to-GDP ratio, as of 2023.
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Top 20 States by Tax Revenue to GDP Ratio in the US
20. Nevada
Total Tax Revenue (2023): $14.17 Billion
GDP (2023): $239.4 Billion
Tax-to-GDP Ratio (2023): 5.92
Nevada has a tax burden of 7.59% and it is one of the least taxed states in the US. Nevada collected over $14 billion in total taxes in 2023 and ranks among the top 20 states by tax revenue to GDP ratio in the US.
19. Indiana
Total Tax Revenue (2023): $30.32 Billion
GDP (2023): $497 Billion
Tax-to-GDP Ratio (2023): 6.10
The state government of Indiana collected over $30 billion in total taxes in 2023. Indiana has a flat personal income tax rate of 3.05%. The state imposes a 7% sales tax rate and property tax rate of 0.84%.
18. Rhode Island
Total Tax Revenue (2023): $4.74 Billion
GDP (2023): $77.3 Billion
Tax-to-GDP Ratio (2023): 6.12
Rhode Island has one of the highest tax burdens in the US. The state has a high sales tax rate of 7% and a graduated income tax rate ranging from 3.57% to 5.99%. With a tax-to-GDP ratio of 6.12, Rhode Island ranks 18th among the states by tax revenue-to-GDP ratio in the US.
17. Kentucky
Total Tax Revenue (2023): $17.22 Billion
GDP (2023): $277.7 Billion
Tax-to-GDP Ratio (2023): 6.19
Kentucky has a state tax burden of 10.83%, including an individual income tax rate of 4%, a state sales tax of 6%, and a property tax rate of 0.83%. Kentucky gathered over $17 billion in total taxes in 2023 and ranks among the states by tax revenue to GDP ratio in the US.
16. Idaho
Total Tax Revenue (2023): $7.38 Billion
GDP (2023): $118.7 Billion
Tax-to-GDP Ratio (2023): 6.21
The state government of Idaho collected over $7 billion in total taxes in 2023. Idaho has a tax burden of 12.47% and a tax-to-GDP ratio of around 6.21.
15. Connecticut
Total Tax Revenue (2023): $21.89 Billion
GDP (2023): $340.2 Billion
Tax-to-GDP Ratio (2023): 6.43
Connecticut has a graduated individual income tax rate ranging between 2% and 6.99%. Connecticut has a high property tax rate of 1.79% and a 6% sales tax rate. Connecticut ranks 15th among the states by tax revenue to GDP ratio in the US.
14. New Jersey
Total Tax Revenue (2023): $51.67 Billion
GDP (2023): $799.3 Billion
Tax-to-GDP Ratio (2023): 6.46
New Jersey has the lowest income tax rate of 1.40% going up to a maximum of 10.75%. With over $51.67 billion in total tax revenue in 2023, New Jersey ranks among the top 20 states by tax revenue to GDP ratio in the US.
13. Oregon
Total Tax Revenue (2023): $20.87 Billion
GDP (2023): $316.5 Billion
Tax-to-GDP Ratio (2023): 6.59
Oregon has a state tax burden of 10.83%. The state imposes an individual income tax of 9.90% and has zero sales tax. The property tax rate stands at 0.93%. In 2023, the state government of Oregon collected over $20 billion in total tax revenues.
12. Wyoming
Total Tax Revenue (2023): $3.35 Billion
GDP (2023): $50.17 Billion
Tax-to-GDP Ratio (2023): 6.67
Wyoming is one of the states with no individual income tax. The state imposes a 0.56% tax on property and a 4% sales tax, including a local sales tax rate of 1.44%. With a tax-to-GDP ratio of 6.67, Wyoming ranks 12th among the states by tax revenue to GDP ratio in the US.
11. Montana
Total Tax Revenue (2023): $4.71 Billion
GDP (2023): $70.56 Billion
Tax-to-GDP Ratio (2023): 6.67
The state government of Montana collected nearly $4.71 billion in total tax revenues in 2023. The state has a graduated personal income tax, ranging from 1% to 5.90%. Montana has zero sales tax and 0.74% property tax. Montana is one of the states with the highest tax-to-GDP ratio in the US.
10. Delaware
Total Tax Revenue (2023): $6.56 Billion
GDP (2023): $93.59 Billion
Tax-to-GDP Ratio (2023): 7.01
With a tax-to-GDP ratio of over 7, Delaware ranks 10th among the states by tax revenue to GDP ratio in the US. Delaware has a state tax burden of 7.21%. The state imposes a personal income tax rate of 6.60%, but it has no sales tax and a low property tax of 0.61%.
9. Mississippi
Total Tax Revenue (2023): $10.33 Billion
GDP (2023): $146.4 Billion
Tax-to-GDP Ratio (2023): 7.05
Mississippi collected over $10 billion in total tax revenues in 2023 and has a tax-to-GDP ratio of 7.05. The state has a GDP of around $146.4 billion and ranks among the states with the highest tax-to-GDP ratio in the US.
8. Maine
Total Tax Revenue (2023): $6.44 Billion
GDP (2023): $91.08 Billion
Tax-to-GDP Ratio (2023): 7.07
Maine has a tax burden of 14.39% and a tax-to-GDP ratio of around 7.07. Maine has graduated individual and corporate income taxes, ranging from 5.80% to 7.15% and from 3.50% to 8.93%, respectively. With a total tax revenue of nearly $6.44 billion, Maine ranks eighth among the states by tax revenue to GDP ratio in the US.
7. Arkansas
Total Tax Revenue (2023): $12.76 Billion
GDP (2023): $176.2 Billion
Tax-to-GDP Ratio (2023): 7.24
Arkansas gathered nearly $12.76 billion in total tax revenues in 2023 and has a tax-to-GDP ratio of 7.24. The state has a GDP of around $176.2 billion and ranks among the states with the highest tax-to-GDP ratio in the US.
6. Minnesota
Total Tax Revenue (2023): $34.47 Billion
GDP (2023): $471.8 Billion
Tax-to-GDP Ratio (2023): 7.31
Minnesota collected over $34 billion in total taxes in 2023. Minnesota has a graduated personal income tax, with rates ranging from 5.35% to 9.85%. The state imposes a corporate income tax of 9.80%. Minnesota ranks among the top 20 states by tax revenue to GDP ratio in the US.
5. West Virginia
Total Tax Revenue (2023): $7.64 Billion
GDP (2023): $99.51 Billion
Tax-to-GDP Ratio (2023): 7.67
With a tax-to-GDP ratio of 7.67, West Virginia ranks fifth among the states by tax revenue to GDP ratio in the US. West Virginia has a graduated state individual income tax, with rates ranging from 2.36% to 6.50%, and has a 6.5% corporate income tax rate. West Virginia has a state sales tax of 6% and a local state sales tax of 0.57%.
4. North Dakota
Total Tax Revenue (2023): $6.05 Billion
GDP (2023): $74.11 Billion
Tax-to-GDP Ratio (2023): 8.16
North Dakota has a sales tax of 5% and charges graduated individual and corporate income taxes, ranging from 1.95% to 2.50% and 1.41% to 4.31%, respectively. The state of North Dakota imposes a 0.97% tax on property.
3. Hawaii
Total Tax Revenue (2023): $10.18 Billion
GDP (2023): $108 Billion
Tax-to-GDP Ratio (2023): 9.43
Hawaii ranks third among the states in terms of tax revenue to GDP ratio. The state government of Hawaii collected total taxes of around $10.18 billion in 2023.
2. Vermont
Total Tax Revenue (2023): $4.49 Billion
GDP (2023): $43.13 Billion
Tax-to-GDP Ratio (2023): 10.43
Vermont collected nearly $4.49 billion in total taxes in 2023. Vermont has a graduated personal income tax, with rates ranging from 3.35% to 8.75%. The state also imposes a graduated corporate income tax from 6% to 8.5%. Vermont has the second highest tax-to-GDP ratio of 10.43 among the US states.
1. New Mexico
Total Tax Revenue (2023): $14.27 Billion
GDP (2023): $130.2 Billion
Tax-to-GDP Ratio (2023): 10.96
New Mexico has a sales tax of 4.88% and one of the highest average local sales tax of 2.74%. The state imposes graduated individual and corporate income taxes, ranging from 1.70% to 5.90% and 4.80% to 5.90%, respectively. The state government of New Mexico has a 0.67% tax on property. With a total tax collection of over $14 billion and a GDP of $130.2 billion, New Mexico ranks first among the top 20 states by tax revenue to GDP ratio in the US.
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Disclosure: None. This article is originally published on Insider Monkey.