Institute on Taxation and Economic Policy (ITEP)
The ITEP Guide to State & Local Taxes

Tax Principles

What Principles Should Guide State and Local Tax Policy?

What Principles Should Guide State and Local Tax Policy?

ITEP explains the five core principles of sound state and local tax policy: adequacy, fairness, neutrality, simplicity, and accountability.

How Do State and Local Tax Systems Affect Racial Justice?

How Do State and Local Tax Systems Affect Racial Justice?

State and local tax codes can narrow or widen racial inequality. Progressive tax policies reduce the racial wealth gap; regressive ones make it worse.

Do Tax Cuts Fuel Growth?

Do Tax Cuts Fuel Growth?

Tax cuts do not reliably fuel economic growth. State and local taxes represent around 2–4% of business costs, and evidence shows public investment in education, infrastructure, and services drives growth more effectively than tax reductions.

How Do State and Local Governments Raise Funds?

How Do State and Local Governments Raise Funds?

State and local governments play important roles in helping communities thrive. They fund and run schools, roads, parks, health programs, human services, public safety agencies, and other key services. To pay for these services, states and local areas receive money from multiple sources. The main source is taxes, but funds from the federal government and fees people pay to use services are also important contributors.

What Are Tax Bases and Tax Rates?

What Are Tax Bases and Tax Rates?

Taxes equal rate × base. Broader bases allow lower rates. Learn the difference between nominal and effective tax rates in this guide from ITEP.

Why Should States and Localities Have Progressive Tax Systems?

Why Should States and Localities Have Progressive Tax Systems?

Learn why progressive state and local tax systems raise more revenue, reduce poverty, and advance racial equity — and why nearly every state's current tax code falls short.

How Does Federal-State Tax Conformity Work?

How Does Federal-State Tax Conformity Work?

Learn how states link to the federal tax code via rolling, fixed-date, or selective conformity — and when they decouple. Includes a 50-state reference table.

What Are Local Governments’ Taxing Authorities?

What Are Local Governments’ Taxing Authorities?

Tens of thousands of local governments in the United States, from big cities like Los Angeles and New York to rural counties, school districts, and small towns, operate schools, roads, parks, public safety, and other services. To pay for it, they collect roughly $1 trillion in taxes annually and receive another $800 billion in grants from states. But states, not just localities, set many of the rules for local taxes, and sometimes use that authority to undermine local democracy.

How Do State Tax and Expenditure Limits Work?

How Do State Tax and Expenditure Limits Work?

A Tax and Expenditure Limit (TEL) is a formula written into state law or into a state constitution that constrains government revenue and spending. These measures can undermine governmental accountability, degrade essential public services like health care and education, and create inequitable tax burdens.

Why Does Tax Incidence Matter and How Do We Measure It?

Why Does Tax Incidence Matter and How Do We Measure It?

Tax incidence shows who pays taxes and how much they pay. In studying tax fairness, tax incidence specifically looks at how much people at different income levels pay. Tax incidence analysis is a critical tool for assessing the fairness of tax systems and in showing the equity or inequity of tax policy proposals.

How Do States Use Combined Reporting to Tax Complex Multi-State Corporations?

How Do States Use Combined Reporting to Tax Complex Multi-State Corporations?

Combined reporting requires corporations with multistate operations to report all their revenues and expenses together, making it harder for them to avoid state taxes by moving money around. This policy mainly affects very large companies, and it helps those states that use it to collect billions in tax revenue to fund services like education, public safety, and infrastructure that businesses and their employees rely on.

What State and Local Taxes Do Undocumented Immigrants Pay?

What State and Local Taxes Do Undocumented Immigrants Pay?

Like everyone else in America, immigrants pay taxes, whatever their legal status. The income taxes, property taxes, and sales and excise taxes paid by both documented and undocumented immigrants help sustain American public schools, services, and infrastructure. Undocumented immigrants paid more than $37 billion to states and localities in 2022, and they pay higher effective state and local tax rates as a share of their incomes than our wealthiest citizens.

What Taxes Are Paid in Puerto Rico and Other U.S. Territories?

What Taxes Are Paid in Puerto Rico and Other U.S. Territories?

U.S. territories collect taxes to fund schools, roads, health care, and other services, somewhat like states do. They levy income taxes, sales taxes, property taxes, and other typical state and local taxes. These taxes can have important progressive elements, but territorial status poses unique challenges for fair and adequate taxation.