Tax Foundation Estimates of State and Local Tax Burdens Are Not Reliable

Publication Date: March 2007

Publisher: Center on Budget and Policy Priorities (Washington, D.C.)

Author(s): Nicholas Johnson; Iris J. Lav; Joseph Llobrera

Research Area: Banking and finance; Government

Keywords: Economic projections; State budgets; Tax code

Type: Report

Abstract:

The apparent timeliness and precision of the Tax Foundation’s estimates are likely to attract the attention of policymakers and the media, who may use the rankings to make claims about a given state’s “tax burden” relative to those in other states. But what the Tax Foundation is unlikely to acknowledge – save in the methodology section at the end of its report, and even there only indirectly – is that its state and local findings do not reflect actual total tax collections for that year or for the previous year. Rather, the findings are estimates and projections, largely derived from years-old data and from national samples that were never intended to be used for state-by-state estimates, and calculated using a methodology that never has been formally published or subject to outside review. This report shows the degree to which their initial projections have been erroneous, and thus potentially misleading to policymakers.