How Are My State Taxes Spent?
Each state collects tax revenue and is free to spend it how they choose. While it varies from state to state, state taxes are commonly used for things like education, transportation, health care, corrections, and low-income assistance. So, what do state taxes pay for? Here's a quick breakdown of how state taxes are used.
Key Takeaways
- Each state is responsible for raising revenue through taxes, which are then used to fund various programs.
- The most common uses of state taxes are education, health care, transportation, corrections, and low-income assistance.
- On average, 25% of state spending goes towards public K-12 education, 13% towards higher education, and 5% towards transportation projects.
- Corrections expenses and low-income assistance programs take up 5% and 1% of state budgets respectively.
State taxes
Taxes are an important part of every person’s life, and where and how they’re spent influence a region or locale’s quality of living.
Although states receive federal assistance for many programs, each state is also responsible for raising revenue through taxes. While not all states levy a personal income tax on state residents, other taxes such as sales taxes also contribute to state revenue.
Each state is free to choose where to spend tax revenue, with the most common uses being education, health care, transportation, corrections and low income assistance
Education spending
According to the Center on Budget and Policy Priorities, an average of about 25 percent of state spending goes towards public K-12 education, about $308 billion for 2015. States typically allocate education expenditures to local school districts for distribution rather than paying expenses directly.
On average, an additional 13 percent of state expenditures fund higher education, including vocational institutions, community colleges and university systems. In fiscal 2015 this equaled about $156 billion nationwide.
Health care allocation
The next largest average state expenditure is on Medicaid programs, amounting to about $207 billion in fiscal year 2015.
State health care expenditures primarily fund Medicaid and the Children's Health Insurance Program or CHIP. In an average month, more than 45 million children, parents, elderly and disabled persons benefit from these programs.
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Other programs such as state police, environmental programs, health benefits for public employees, pensions, care for residents with disabilities, parks and recreation, economic development, and general aid to local governments consume about 35% of state budgets on a nationwide basis.
Transportation expenses
State transportation expenses include funding for public transit systems, such as light rail, and infrastructure spending, including building and repairing roads and bridges. On average, states expend about 5 percent of their budgets for transportation projects, or about $66 billion.
Corrections facilities
In addition to state prison costs, corrections expenses include juvenile justice programs and parole programs. Total corrections expenditures approximate $55 billion per year nationwide, or about 5 percent of state budgets.
Low-income assistance
At about 1 percent of state spending, low income assistance programs take up a small amount of state budgets. These programs, totaling about $11 billion annually, include both the Temporary Assistance to Needy Families program, as well as general assistance given in addition to low income health care programs.
Additional programs
While no remaining state programs claim a large individual percentage of state budgets, additional programs overall consume about 35 percent of state budgets on a nationwide basis.
Included in this category are:
- expenditures for state police
- environmental programs
- health benefits for public employees
- pensions
- care for residents with disabilities
- parks and recreation
- economic development
- general aid to local governments
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