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Individual income tax is one of the biggest sources of

revenue for most states. Tax rates vary widely among

states. Florida has no income tax, but California has a

13.3 percent income tax rate.

Differences exist in other taxes, such as sales taxes,

that are collected by states. Five states do not impose

any statewide sales tax: Alaska, Delaware, Montana,

New Hampshire, and Oregon. However, Montana and

Alaska do let sales tax be charged at the local level.

Forty-five states collect statewide sales taxes and

38 states impose only local sales taxes. The five states

with the highest average combined state-local sales

tax rates are Tennessee (9.45 percent), Arkansas (9.26

percent), Alabama (8.91 percent), Louisiana (8.91

percent), and Washington (8.89 percent).

It is essential to understand how the tax system

works in the state where a person lives. Differences

occur not only in what type of tax is collected, but also

at what level (state versus local) the tax is levied.

State governments use the tax collected to meet the

needs of that state. The 50 states (and the District of

Columbia) spent $1.1 trillion in state revenues in fiscal

year 2013, according to the most recent survey by the

National Association of State Budget Officers (NASBO).

For most states, the largest area for spending is

education (K-12 education), Medicaid, and children’s

health programs. Other areas include higher education,

transportation, corrections, and public assistance.

In Canada

The Canada Revenue Agency is the Canadian version

of the IRS. Taxes are levied at the federal, provincial,

and municipal levels. Common taxes include sales tax,

property tax, business tax, and income tax.

The federal income tax rates for Canadians in 2016

was 15 percent on the first $45,282 of taxable income

and up to 33 percent of taxable income over $200,000.

Some indirect taxes paid by Canadians include the

goods and services tax (GST), the harmonized sales

tax (HST) systems, and provincial sales taxes (PSTs).

GOVERNMENT SPENDING

How revenue is spent

Sources of excise tax revenue in 2014:

Revenue received by the government through taxation

funds public spending. Most revenue goes to meeting

social security obligations, social welfare programs, and

public sector pensions. Defense spending makes up 16

percent of the budget. The charts above and below reflect

data from the Office of Management and Budget.

Highway 38%

Tobacco 17%

Aviation 14%

ACA 14%

Alcohol 11%

Other 6%

Defense

16%

All other

3%

Non-security

international

1%

Science and medical

research

2%

Medicare,

Medicaid,

C H I P, e t c.

25%

Social

Security

24%

Safety net

programs

10%

Interest

on debt

6%

Education

3%

Infrastructure

2%

Benefits for

federal

retirees and

veterans

8%

MONEY IN THE US

Public finance

40

35

30

25

15

10

5

0

20

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