Latinos in Democratic states will pay more taxes in 2022

As Americans rush to file their taxes before the April 18 deadline, new data suggests that Latinos taxpayers’ contributions to the U.S. economy account for some of the largest portions of the government’s spending power.

But as a new Tax Foundation report shows, not all states tax equally and state and local tax burdens appear to be much higher in Democrat-run states – a fact that is especially troubling for Latinos, who traditionally have made their homes in blue states like California, New York, Illinois and Colorado.

According to the data, the five states with the highest tax burdens are New York (15.9%), Connecticut (15.4%), Hawaii (14.1%), Vermont (13.6%) and California (13.5%) while the 5 states with the lowest tax burdens are Alaska (4.6%), Wyoming (7.5%), Tennessee (7.6%), South Dakota (8.4%) and Michigan (8.6%).

However, when ranking states by Latino population, one quickly finds that Latinos living in the top blue states are paying significantly more taxes than their counterparts in GOP-led red states.

BLUE STATES:

California (Latino Population: 15,574,000; Effective Tax Rate: 15.4%; Tax burden ranking: 46)

New York (Latino Population: 11,524,000; Effective Tax Rate: 15.9%; Tax burden ranking: 50)

Illinois (Latino Population: 2,216,000; Effective Tax Rate: 12.9%; Tax burden ranking: 44)

New Jersey (Latino Population: 1,856,000; Effective Tax Rate: 13.2%; Tax burden ranking: 45)

Colorado (Latino Population: 1,256,000; Effective Tax Rate: 9.7%; Tax burden ranking: 19)

New Mexico (Latino Population: 1,032,000; Effective Tax Rate: 10.2%; Tax burden ranking: 25)

RED STATES:

Texas (Latino Population: 11,524,000; Effective Tax Rate: 8.6%; Tax burden ranking: 6)

Florida (Latino Population: 5,663,000; Effective Tax Rate: 9.1%; Tax burden ranking: 11)

Arizona (Latino Population: 2,310,000; Effective Tax Rate: 9.5%; Tax burden ranking: 15)

Georgia (Latino Population: 1,042,000; Effective Tax Rate: 8.9%; Tax burden ranking: 8)

As Jared Walczak and Erica York from the Tax Foundation note, a state’s tax burden is defined as state and local taxes paid by a state’s residents divided by that state’s share of net national product.

In 2022, they believe the total state and local revenue collected in taxes will make up approximately 11.2% of the U.S.’ GDP -- and as Latinos continue to join the workforce in droves, their contribution is becoming increasingly more significant. 

In 2015, Latinos had an estimated after-tax income of more than $687.8 billion to spend and ultimately contributed close to $215 billion to U.S. tax revenues, including $76 billion in state and local taxes.

Even non-resident aliens have paid into the American tax system through sales and property taxes, and in 2010, around 3 million Individual Taxpayer Identification Number holders paid more than $870 million in income taxes.

Since then, the numbers have only grown. 

But as Latinos continue to move away from the Democratic Party – instead joining the ranks of the GOP – there is evidence to suggest that they are also choosing to leave blue states with high tax burdens.

U.S. Census Bureau data shows that while the United States experienced its lowest population growth since the nation’s founding in 2021, several states saw significant shifts in population as residents moved to pursue more economically attractive jurisdictions.

According to the data, the five states (including Washington, D.C.) that lost the most residents per scale were Washington, D.C. (D), New York (D), Illinois (D), Hawaii (D) and California (D).

Meanwhile, the five states that saw the largest gains in population per scale were Idaho (R), Utah (R), Montana (R), Arizona (R) and South Carolina (R).

What is of note here is that while high-tax states with Democratic governors lost the largest number of residents, low-tax states with Republican governors welcomed the largest number of new residents in 2021.

Although data does not yet exist to analyze how this has impacted Latino moves across state-lines, the population's growing affinity to the GOP's low-tax economic platform might suggest that Latinos, too, are moving in hopes of finding friendlier tax regimes. 

This is especially of note as the U.S. Latino population has grown significantly in the last decade and accounted for 51% of the entire U.S. population growth between 2010 and 2020.

According to the Pew Research Center, although all 50 states and Washington, D.C. have seen growth in their Latino populations in the last decade, the four states that have experienced the lowest growth are Democrat-led California, New York, Illinois and New Mexico.

Meanwhile, Republican-led states like Texas, Florida, North Dakota and South Dakota saw the fastest growth in their Latino populations.

Tax Day is quickly approaching and Americans across the country -- including Latinos and their families -- will have to decide if staying in their high-tax cities still makes sense as food and gas prices continue to rise and the country faces its highest levels of inflation in 40 years.