I had a discussion a long time ago that basicly said tax revenue for the federal government should be pegged to 1.5 times the current state retail sales tax.
It made for an interesting discussions for several hours about how California would either lower it's sales tax or that states would then compete against each other for business by lowering sales rates.
We even kicked around the possibility of one state eliminating the sales tax and only relying on property taxes and what that would do.
I must admit it was an interesting mental exercise.
I had a discussion a long time ago that basicly said tax revenue for the federal government should be pegged to 1.5 times the current state retail sales tax.
In terms of total effective tax rates the current ratio of federal vs state looks to be about 1.8, after the Bush tax cuts:
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Total Effective Tax Rates by Level of Government |
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| Year | Federal | State | Total |
| 2000 | 23.1% | 10.4% | 33.5% |
| 2001 | 22.2% | 10.5% | 33.7% |
| 2002 1 | 19.7% | 10.2% | 29.2% |
| 2003 2 | 18.5% | 10.1% | 28.6% |
| 2004 3 | 17.9% | 10.0% | 27.9% |
| 1 Economic Growth and Tax Reform Reconciliation Act of 2001 2 The Job Creation and Worker Assistance Act of 2002 3 Job Growth and Tax Relief Reconciliation Act of 2003 Sources: Office of Management and Budget; Internal Revenue Service; Congressional Research Service; National Bureau of Economic Research; Treasury Department; and Tax Foundation calculations. |
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