The Best and Worst States for Taxes

Everyone in the U.S. is subject to the same federal taxes, but state and local taxes vary greatly. Depending on where you live, you might be paying a lot more in taxes than the residents of the state (or county) next to you.

To help answer the question of “what states pay the most and least taxes?”, we performed a comprehensive analysis of all possible state and local taxes. We analyzed the income, property, sales, and gross receipts tax of each state to determine where people were paying the most in combined taxes.

While performing our analysis, we discovered that states had very different tax situations for low income and high income individuals. States without an income tax were good states to have a high income (Texas, Florida, and Washington). Other states put a larger tax burden on lower income households by having a flat income tax structure and relying more on property tax or sales tax (New Hampshire, Illinois, Massachusetts, and Tennessee). Finally, other states just consistently had high tax rates for every income level by having high taxes everywhere (New York, New Jersey, Oregon, and Iowa). Therefore, we performed our analysis with varying levels of income in order to paint the full picture of state & local income tax burdens.

A summary of our results, along with an in-depth discussion, can be found below.



Effective Total State & Local Tax Rates

Effective Tax Rate = Total Taxes Paid / Gross Income

State Income =
$40,000
Income =
$80,000
Income =
$120,000
Income =
$250,000
Alabama 7.7% 7.5% 7.5% 6.8%
Alaska 5.2% 3.8% 3.3% 2.6%
Arizona 6.9% 6.3% 6.3% 6.1%
Arkansas 8.8% 9.0% 9.2% 8.8%
California 9.4% 8.9% 9.9% 11.1%
Colorado 8.8% 8.0% 7.8% 7.0%
Connecticut 11.2% 10.3% 10.2% 9.6%
Delaware 5.8% 6.3% 6.7% 7.1%
D.C. 9.0% 9.2% 9.9% 10.1%
Florida 5.5% 4.1% 3.7% 2.7%
Georgia 8.7% 8.6% 8.6% 8.1%
Hawaii 7.7% 8.5% 9.0% 9.2%
Idaho 6.8% 8.2% 8.7% 8.8%
Illinois 12.0% 10.2% 9.7% 8.4%
Indiana 6.6% 6.1% 6.0% 5.3%
Iowa 10.3% 10.5% 11.0% 11.0%
Kansas 8.0% 7.8% 7.8% 7.2%
Kentucky 9.2% 8.6% 8.5% 7.9%
Louisiana 6.5% 6.5% 6.7% 7.1%
Maine 7.4% 8.2% 8.8% 9.0%
Maryland 10.1% 9.0% 8.7% 8.0%
Massachusetts 11.8% 10.3% 9.9% 8.8%
Michigan 8.6% 7.8% 7.7% 7.0%
Minnesota 8.7% 9.0% 9.4% 9.5%
Mississippi 7.0% 7.1% 7.2% 6.8%
Missouri 8.2% 8.4% 8.6% 8.1%
Montana 6.3% 7.3% 7.6% 7.8%
Nebraska 8.9% 8.6% 9.2% 9.2%
Nevada 5.3% 4.0% 3.6% 2.6%
New Hampshire 12.4% 10.5% 9.9% 8.9%
New Jersey 14.3% 11.4% 11.5% 11.1%
New Mexico 6.4% 6.9% 7.1% 6.8%
New York 12.9% 12.0% 11.9% 11.0%
North Carolina 8.5% 8.4% 8.4% 7.8%
North Dakota 5.8% 4.8% 4.8% 4.3%
Ohio 8.1% 7.3% 7.3% 7.0%
Oklahoma 7.6% 7.6% 7.7% 7.2%
Oregon 11.2% 11.1% 11.0% 10.8%
Pennsylvania 9.9% 8.1% 7.6% 6.5%
Rhode Island 10.1% 9.0% 8.9% 8.8%
South Carolina 6.3% 7.7% 8.2% 8.3%
South Dakota 5.5% 4.1% 3.7% 2.7%
Tennessee 11.5% 9.9% 9.6% 8.6%
Texas 7.9% 5.9% 5.3% 4.0%
Utah 9.3% 8.2% 8.0% 7.3%
Vermont 10.3% 9.0% 9.4% 9.9%
Virginia 9.5% 8.8% 8.7% 8.1%
Washington 7.6% 5.7% 5.1% 3.8%
West Virginia 6.9% 7.4% 7.7% 7.7%
Wisconsin 9.5% 9.6% 9.7% 9.3%
Wyoming 4.0% 3.0% 2.7% 2.0%

States with Most Regressive Tax Structures

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States with Most Progressive Tax Structures

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States with Highest Tax Rates Across All Incomes

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States with Lowest Tax Rates Across All Incomes

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Discussion:

  • There are three main sources of state and local taxes:
    • Income Tax
      • State income tax structures are either progressive (which means that higher incomes pay a higher tax rate) or flat (which means everyone pays the same tax rate)
    • Property Tax
      • Property taxes have a regressive structure (which means that lower income households pay a higher tax rate).
        • Property tax rates initially appear to have a flat structure because they are structured as a flat tax on property values. However, people with lower incomes spend a higher proportion of their income on housing costs, which translates to lower income households spending a higher proportion of their income on property taxes.
    • Sales & Gross Receipts Tax
      • Sales & Gross Receipts taxes also have a regressive structure (which means that lower income households pay a higher tax rate).
        • Sales tax rates appear to have a flat structure because they are structured as a flat tax on goods and services. However, lower income households spend a higher proportion of their incomes on taxable goods and services and therefore spend a higher proportion of their income on sales & gross receipts taxes.
  • When a state has no income tax (which is the only progressive tax structure), then that state will have an overall regressive tax structure.
    • States that omit income tax tend to generally also have lower taxes overall. Therefore in many cases, although the state has a regressive tax structure, a person with a lower income might be paying less taxes than if they were a resident of a state with a progressive tax structure.
  • When a state has a high income tax, then the state will tend to have a progressive tax structure and have high taxes on high income households.
  • Some cities have income taxes. Yes, that’s right, some cities have their own income tax. If you’re in a city with an income tax of its own, you”ll be paying federal income tax, state income tax, and city income tax. We did not include the effect of city income taxes in our analysis.
    • However, we did look at the most populous example of a city with an income tax: New York City.
      • In NYC, you’ll be paying an effective tax rate of 1.8% to 3.3% of your income towards the city income tax for the incomes that we analyzed.
      • If you add in the city income tax for NYC, it has the highest taxes for each income level (compared to each individual state) by a good margin.
  • One question that we had while doing this analysis was: “Why do some states have so much higher taxes than other states?” We did some research to answer this question.

Methodology:

  • Income Tax
    • To calculate the income tax in each state, we were able to obtain the tax brackets, standard deductions, and personal exemptions for each state from The Tax Foundation.
    • In calculating income tax, we assumed a filing status of ‘married filing jointly’ with no dependents. If you add dependents, or change the filing status to single, the results of the analysis do not materially change.
  • Property Tax
    • Property tax can be difficult to analyze because most property tax is collected by local governments. Therefore, property tax rates can vary a lot within a state. However, generally there is a positive correlation between the property tax rates between different areas of the state. This means that high property tax states generally have high property tax rates everywhere.
    • Another difficulty in analyzing property tax is that home values vary greatly across the country. For instance, homes in California are much more expensive than homes in Alabama. Therefore, if you only look at property tax rates as a percentage of home values, these can be misleading since 2% of home values in Alabama is very different than 2% of home values in California.
    • To account for these differences among states, we used data from the U.S. Census American Community Survey to calculate the ratio of the median property tax paid to the median household income of owner-occupied homes in each state. This calculation determines the percentage of income that homeowners in each state is spending on property tax. We then use this ratio for the median homeowner income level and extrapolate it to other income levels in the state. In order to do this, we need to know how much each income level generally spends on housing. To determine this, we used data from the Bureau of Labor Consumer Expenditure Report that shows the housing expenditures for different income levels.
      • As an example, if the median homeowner in California has a household income of $120,000 and pays $4,000 in property taxes, then for an income level of $120,000 in California, we assume that they are paying $4,000 in property taxes. In order to estimate the property taxes paid for someone other than the median household income in California, then we will use an extrapolation based on the relationship between income levels and dwelling costs. For instance, we know from the Consumer Expenditure Report that a household income of $80,000 generally spends about 30% less on dwelling costs than a household with a $120,000 income, so we will approximate that the $80,000 income household is spending $4,000*0.7=$2,800 towards property taxes in California.
    • We did not include any adjustments for income levels to reflect the cost of renting (versus owning) in this analysis. Although renters may not pay property taxes directly, it is still a cost paid by everyone in the state including renters because renters indirectly pay the property tax for their dwelling through their rent. This means that in states with high property tax rates, you should expect that all rental rates will be higher for everyone to pay for the increased cost of property tax. Therefore, even if you’re just renting a place, you’ll still be paying for the high (or low) property taxes of your state.
  • Sales and Gross Receipts Tax
    • Average combined sales and gross receipts tax rates were obtained from a study by The Tax Foundation which computed each state’s population-weighted average sales and gross receipts tax rates by zip code.
    • We also used the Consumer Expenditure Report to determine how much each income level were spending on services & non-grocery goods that are subject to sales tax.
    • Groceries are not subject to sales taxes in most states. However, there are some states where groceries are taxed and this is a large category of spending category (as a percent of income) for low-income households. Therefore, it’s important to analyze this category separately. We used a report by the Federation of Tax Administrators to determine the grocery tax rates by state. We used the Consumer Expenditure Report to determine how much each income level was spending towards groceries each year.

Appendix:


Effective Income Tax (as Percent of Gross Income)

State Income =
$40,000
Income =
$80,000
Income =
$120,000
Income =
$250,000
Alabama 3.5% 4.2% 4.5% 4.8%
Alaska 0.0% 0.0% 0.0% 0.0%
Arizona 1.7% 2.4% 2.8% 3.5%
Arkansas 3.9% 5.4% 5.9% 6.4%
California 1.2% 2.8% 4.5% 7.0%
Colorado 3.7% 4.2% 4.3% 4.5%
Connecticut 1.2% 3.0% 3.7% 4.7%
Delaware 3.7% 4.8% 5.4% 6.0%
D.C. 3.7% 5.2% 6.3% 7.5%
Florida 0.0% 0.0% 0.0% 0.0%
Georgia 3.8% 4.9% 5.3% 5.6%
Hawaii 4.2% 5.8% 6.5% 7.4%
Idaho 2.4% 4.9% 5.7% 6.6%
Illinois 2.2% 3.0% 3.2% 3.5%
Indiana 2.1% 2.7% 2.9% 3.1%
Iowa 4.5% 6.1% 7.1% 8.1%
Kansas 1.9% 3.2% 3.7% 4.2%
Kentucky 5.0% 5.4% 5.6% 5.8%
Louisiana 1.9% 2.9% 3.5% 4.8%
Maine 1.3% 3.6% 4.7% 6.0%
Maryland 3.4% 4.1% 4.3% 4.7%
Massachusetts 4.0% 4.5% 4.7% 4.9%
Michigan 2.5% 3.4% 3.7% 4.0%
Minnesota 2.6% 4.5% 5.3% 6.5%
Mississippi 2.6% 3.8% 4.2% 4.6%
Missouri 2.9% 4.5% 5.0% 5.5%
Montana 3.2% 5.1% 5.7% 6.3%
Nebraska 2.2% 3.6% 4.7% 5.8%
Nevada 0.0% 0.0% 0.0% 0.0%
New Hampshire 4.4% 4.7% 4.8% 4.9%
New Jersey 1.5% 2.0% 3.1% 4.7%
New Mexico 1.4% 3.1% 3.7% 4.3%
New York 2.5% 4.3% 5.0% 5.8%
North Carolina 3.6% 4.7% 5.0% 5.4%
North Dakota 0.5% 0.8% 1.2% 1.7%
Ohio 1.9% 2.6% 3.1% 3.9%
Oklahoma 2.3% 3.6% 4.1% 4.6%
Oregon 6.8% 7.9% 8.3% 8.6%
Pennsylvania 3.1% 3.1% 3.1% 3.1%
Rhode Island 1.5% 2.6% 3.3% 4.5%
South Carolina 2.2% 4.6% 5.4% 6.2%
South Dakota 0.0% 0.0% 0.0% 0.0%
Tennessee 5.6% 5.8% 5.9% 5.9%
Texas 0.0% 0.0% 0.0% 0.0%
Utah 4.3% 4.6% 4.8% 4.9%
Vermont 1.7% 2.6% 3.7% 5.6%
Virginia 4.0% 4.9% 5.2% 5.5%
Washington 0.0% 0.0% 0.0% 0.0%
West Virginia 3.5% 4.8% 5.3% 5.9%
Wisconsin 2.2% 4.2% 4.9% 5.6%
Wyoming 0.0% 0.0% 0.0% 0.0%

Effective Property Tax (as Percent of Gross Income)

State Income =
$40,000
Income =
$80,000
Income =
$120,000
Income =
$250,000
Alabama 1.1% 0.8% 0.7% 0.5%
Alaska 4.6% 3.3% 2.9% 2.3%
Arizona 2.3% 1.7% 1.5% 1.2%
Arkansas 1.5% 1.1% 0.9% 0.7%
California 5.2% 3.8% 3.3% 2.6%
Colorado 2.4% 1.8% 1.5% 1.2%
Connecticut 7.7% 5.6% 4.9% 3.9%
Delaware 2.1% 1.5% 1.3% 1.1%
District of
Columbia
3.3% 2.3% 2.1% 1.6%
Florida 3.1% 2.2% 2.0% 1.6%
Georgia 2.5% 1.8% 1.6% 1.2%
Hawaii 2.0% 1.5% 1.3% 1.0%
Idaho 2.3% 1.6% 1.4% 1.1%
Illinois 6.9% 4.9% 4.3% 3.4%
Indiana 2.0% 1.4% 1.2% 1.0%
Iowa 3.5% 2.5% 2.2% 1.7%
Kansas 3.2% 2.3% 2.0% 1.6%
Kentucky 2.1% 1.5% 1.3% 1.1%
Louisiana 1.5% 1.1% 1.0% 0.8%
Maine 4.2% 3.0% 2.7% 2.1%
Maryland 4.6% 3.3% 2.9% 2.3%
Massachusetts 5.6% 4.1% 3.6% 2.8%
Michigan 3.9% 2.8% 2.5% 1.9%
Minnesota 3.6% 2.6% 2.2% 1.8%
Mississippi 1.9% 1.4% 1.2% 1.0%
Missouri 2.5% 1.8% 1.6% 1.2%
Montana 3.1% 2.2% 1.9% 1.5%
Nebraska 4.3% 3.1% 2.7% 2.2%
Nevada 2.5% 1.8% 1.6% 1.2%
New Hampshire 8.0% 5.8% 5.1% 4.0%
New Jersey 10.4% 7.5% 6.6% 5.2%
New Mexico 2.4% 1.7% 1.5% 1.2%
New York 7.4% 5.4% 4.7% 3.7%
North Carolina 2.5% 1.8% 1.6% 1.2%
North Dakota 2.9% 2.1% 1.9% 1.5%
Ohio 3.7% 2.7% 2.3% 1.9%
Oklahoma 2.2% 1.6% 1.4% 1.1%
Oregon 4.4% 3.2% 2.8% 2.2%
Pennsylvania 4.6% 3.3% 2.9% 2.3%
Rhode Island 6.1% 4.4% 3.9% 3.1%
South Carolina 1.6% 1.2% 1.0% 0.8%
South Dakota 3.4% 2.5% 2.2% 1.7%
Tennessee 2.0% 1.5% 1.3% 1.0%
Texas 5.1% 3.7% 3.2% 2.6%
Utah 2.4% 1.7% 1.5% 1.2%
Vermont 6.4% 4.6% 4.1% 3.2%
Virginia 3.3% 2.4% 2.1% 1.7%
Washington 4.5% 3.2% 2.8% 2.2%
West Virginia 1.3% 0.9% 0.8% 0.7%
Wisconsin 5.4% 3.9% 3.4% 2.7%
Wyoming 2.0% 1.5% 1.3% 1.0%

Effective Sales Tax Rates (as Percent of Gross Income)

State Income =
$40,000
Income =
$80,000
Income =
$120,000
Income =
$250,000
Alabama 3.2% 2.5% 2.3% 1.6%
Alaska 0.6% 0.5% 0.5% 0.3%
Arizona 2.9% 2.3% 2.1% 1.4%
Arkansas 3.4% 2.6% 2.4% 1.6%
California 3.0% 2.3% 2.2% 1.5%
Colorado 2.6% 2.1% 1.9% 1.3%
Connecticut 2.3% 1.8% 1.6% 1.1%
Delaware 0.0% 0.0% 0.0% 0.0%
District of
Columbia
2.0% 1.6% 1.5% 1.0%
Florida 2.4% 1.9% 1.7% 1.2%
Georgia 2.5% 1.9% 1.8% 1.2%
Hawaii 1.5% 1.2% 1.1% 0.8%
Idaho 2.1% 1.7% 1.6% 1.1%
Illinois 3.0% 2.3% 2.1% 1.4%
Indiana 2.5% 1.9% 1.8% 1.2%
Iowa 2.4% 1.9% 1.7% 1.2%
Kansas 2.9% 2.3% 2.1% 1.4%
Kentucky 2.1% 1.7% 1.5% 1.1%
Louisiana 3.2% 2.5% 2.3% 1.6%
Maine 2.0% 1.5% 1.4% 1.0%
Maryland 2.1% 1.7% 1.5% 1.1%
Massachusetts 2.2% 1.7% 1.6% 1.1%
Michigan 2.2% 1.7% 1.5% 1.1%
Minnesota 2.6% 2.0% 1.9% 1.3%
Mississippi 2.5% 2.0% 1.8% 1.2%
Missouri 2.8% 2.2% 2.0% 1.4%
Montana 0.0% 0.0% 0.0% 0.0%
Nebraska 2.4% 1.9% 1.8% 1.2%
Nevada 2.8% 2.2% 2.0% 1.4%
New Hampshire 0.0% 0.0% 0.0% 0.0%
New Jersey 2.5% 1.9% 1.8% 1.2%
New Mexico 2.6% 2.0% 1.9% 1.3%
New York 3.0% 2.4% 2.2% 1.5%
North Carolina 2.4% 1.9% 1.8% 1.2%
North Dakota 2.3% 1.8% 1.7% 1.2%
Ohio 2.5% 2.0% 1.8% 1.2%
Oklahoma 3.1% 2.4% 2.3% 1.5%
Oregon 0.0% 0.0% 0.0% 0.0%
Pennsylvania 2.3% 1.8% 1.6% 1.1%
Rhode Island 2.5% 1.9% 1.8% 1.2%
South Carolina 2.5% 2.0% 1.8% 1.2%
South Dakota 2.1% 1.6% 1.5% 1.0%
Tennessee 3.8% 2.6% 2.4% 1.7%
Texas 2.9% 2.2% 2.1% 1.4%
Utah 2.6% 1.9% 1.7% 1.2%
Vermont 2.2% 1.7% 1.6% 1.1%
Virginia 2.2% 1.6% 1.5% 1.0%
Washington 3.2% 2.5% 2.3% 1.6%
West Virginia 2.2% 1.7% 1.6% 1.1%
Wisconsin 1.9% 1.5% 1.4% 1.0%
Wyoming 1.9% 1.5% 1.4% 1.0%

Effective Total Tax Paid (as Percent of Gross Income)
Includes Federal Income Tax and FICA Tax

State Income =
$40,000
Income =
$80,000
Income =
$120,000
Income =
$250,000
Alabama 20.3% 25.1% 28.7% 34.7%
Alaska 17.8% 21.4% 24.6% 30.4%
Arizona 19.5% 24.0% 27.6% 33.9%
Arkansas 21.3% 26.6% 30.5% 36.6%
California 22.0% 26.5% 31.2% 38.9%
Colorado 21.3% 25.6% 29.1% 34.8%
Connecticut 23.7% 27.9% 31.5% 37.4%
Delaware 18.3% 23.9% 28.0% 34.9%
District of
Columbia
21.6% 26.8% 31.2% 37.9%
Florida 18.0% 21.7% 25.0% 30.5%
Georgia 21.3% 26.2% 29.9% 35.9%
Hawaii 20.3% 26.1% 30.2% 37.0%
Idaho 19.3% 25.8% 30.0% 36.6%
Illinois 24.6% 27.8% 31.0% 36.2%
Indiana 19.1% 23.7% 27.2% 33.1%
Iowa 22.9% 28.1% 32.3% 38.8%
Kansas 20.6% 25.4% 29.1% 35.0%
Kentucky 21.8% 26.2% 29.8% 35.7%
Louisiana 19.1% 24.1% 28.0% 34.9%
Maine 20.0% 25.8% 30.1% 36.8%
Maryland 22.7% 26.6% 30.0% 35.8%
Massachusetts 24.4% 28.0% 31.2% 36.6%
Michigan 21.2% 25.4% 29.0% 34.8%
Minnesota 21.3% 26.6% 30.7% 37.3%
Mississippi 19.5% 24.7% 28.5% 34.6%
Missouri 20.7% 26.0% 29.9% 35.9%
Montana 18.8% 24.9% 28.9% 35.6%
Nebraska 21.5% 26.2% 30.5% 37.0%
Nevada 17.9% 21.6% 24.9% 30.4%
New Hampshire 25.0% 28.1% 31.2% 36.7%
New Jersey 26.9% 29.0% 32.8% 38.9%
New Mexico 19.0% 24.5% 28.4% 34.6%
New York 25.5% 29.6% 33.2% 38.8%
North Carolina 21.1% 26.0% 29.7% 35.7%
North Dakota 18.4% 22.4% 26.0% 32.1%
Ohio 20.7% 24.9% 28.6% 34.8%
Oklahoma 20.1% 25.3% 29.0% 35.0%
Oregon 23.8% 28.7% 32.3% 38.7%
Pennsylvania 22.5% 25.7% 28.9% 34.3%
Rhode Island 22.6% 26.6% 30.2% 36.6%
South Carolina 18.9% 25.3% 29.5% 36.1%
South Dakota 18.0% 21.7% 24.9% 30.5%
Tennessee 24.0% 27.5% 30.9% 36.4%
Texas 20.5% 23.5% 26.6% 31.8%
Utah 21.9% 25.8% 29.3% 35.1%
Vermont 22.9% 26.6% 30.7% 37.7%
Virginia 22.1% 26.4% 30.0% 35.9%
Washington 20.2% 23.3% 26.4% 31.6%
West Virginia 19.5% 25.0% 29.0% 35.5%
Wisconsin 22.1% 27.2% 31.0% 37.1%
Wyoming 16.5% 20.6% 24.0% 29.8%



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