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From Governing’s
STATE TAX SYSTEMS: A SPECIAL REPORT THE BROAD BEAM The states of Montana and Washington are near the extremes of volatility versus stability. The difference has little to do with the states' economies and plenty to do with policy decisions. Montana relies on severance taxes and they can swing wildly depending on the price of natural resources. It also leans more heavily on the property tax — which it uses for state funding of schools — than does the typical state. It has no sales tax, and it depends on the income tax about as much as the typical state does.
Washington, by contrast, has no income tax and relies disproportionately on the state sales tax. Although this lack of diversity can be seen as a shortcoming for the state's structure — and critics complain that sales taxes weigh too heavily on low-income groups — sales taxes tend to be far more stable than income taxes. 
Both states are heavily dependent on a single kind of tax. But Montana is narrowly focused on all the natural resources that back up its slogan, "The Treasure State." Washington's sales tax, on the other hand, is broad-based. Many of the steepest variations in Montana's revenues occurred in the early 1990s and were related in part to changing choices about how to finance schools. So, the state's revenue streams aren't as unpredictable as they used to be, although they are still more dicey than Washington's. Graphic: EMacDesign.com © 2008, Congressional Quarterly, Inc. Reproduction in any form without the written permission of the publisher is prohibited. Governing, City & State and Governing.com are registered trademarks of Congressional Quarterly, Inc. |
