Benjamin Franklin once wrote:
“In this world nothing can be said to be certain, except death and taxes.”
If you’re like most Americans, paying Uncle Sam is your largest financial burden. In fact, the nation as a whole doesn’t earn enough money to pay its total tax bill for the year until mid-April. Making matters worse for some individuals, taxes can vary significantly between states.
WalletHub recently analyzed how state and local tax rates compare to the national median in all 50 states as well as the District of Columbia. The purpose was to determine which states pay the highest and lowest tax rates, and to see how each state stacks up against the national median. This comparison was based on nine different types of taxation: real estate taxes, state and local income taxes, vehicle property taxes, vehicle sales taxes, sales and use taxes, fuel taxes, alcohol taxes, food taxes, and telecom taxes.
Taxpayers in the states with the highest taxes pay four times more than those in the states with the lowest taxes. We previously took a look at the states with the lowest taxes – now, let’s take a look at the 10 states with the highest state and local taxes, according to WalletHub.
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10. Maine
Average Annual State and Local Taxes: $8,622
Difference from National Average: 24 percent
Adjusted Rank by Cost of Living: 43
New England is not particularly kind to taxpayers. Maine ranks as the 10th worst state when it comes to tax bills. However, a move from Maine to New Hampshire or Massachusetts may lower your tax burden. In comparison, New Hampshire has an average annual state and local tax bill of $7,419, while Massachusetts has an average bill of $6,884. In a separate analysis conducted by WalletHub, Main also ranks No. 27 in regard to finding tax help from accountants.
9. Iowa
Average Annual State and Local Taxes: $8,788
Difference from National Average: 26 percent
Adjusted Rank by Cost of Living: 33
Iowa ranks as the ninth worst state with few solutions for taxpayers looking to stay close to home. Out of the six bordering states, South Dakota has the lowest average tax bill at $3,766. That is a sizable difference, but few people are willing to move to South Dakota primarily for tax reasons. Missouri might be the most practical option. The state ranks in the middle of the national rankings at $7,220.
8. New Jersey
Average Annual State and Local Taxes: $8,830
Difference from National Average: 27 percent
Adjusted Rank by Cost of Living: 47
New Jersey ranks as the eighth worst state for taxpayers, with the average burden totaling $8,830. In comparison, Delaware is one of the best ranking states with an average tax bill of only $5,195. New Jersey also ranks poorly when it comes to return on tax dollars and tax help from accountants. Recent reports indicate that Republican New Jersey Governor Chris Christie blames high taxes as a primary reason for Mercedes-Benz leaving New Jersey and moving operations to Georgia.
7. Vermont
Average Annual State and Local Taxes: $8,838
Difference from National Average: 27 percent
Adjusted Rank by Cost of Living: 45
Staying in New England, Vermont ranks as the seventh worst state for taxpayers. The average burden for state and local taxes is $8,838. However, Vermont residents enjoy a significant return on their tax dollars. WalletHub also finds that Vermont is the second best state in the nation in regard to government services, including infrastructure, education, health, safety, and pollution.
6. Wisconsin
Average Annual State and Local Taxes: $8,975
Difference from National Average: 29 percent
Adjusted Rank by Cost of Living: 39
Wisconsin ranks as the sixth worst state for taxpayers, with the average burden totaling $8,975. Other states in the area with lower tax bills are also high. Michigan ranks poorly at $7,867, while Minnesota averages $8,261. Indiana offers some relief with an average tax bill of only $6,358. Wisconsin initiated $1.1 billion in tax breaks over the past couple years, but a recent analysis reveals that the wealthiest 1% of residents claimed most of the benefits. Those with an average income of $1.1 million received an average tax cut of $2,518. That is 53 times higher than the tax cut received by the lowest income group.
5. Illinois
Average Annual State and Local Taxes: $9,006
Difference from National Average: 29 percent
Adjusted Rank by Cost of Living: 38
The Prairie State ranks as the fifth worst state for taxpayers. The average burden for state and local taxes is $9,006. Only five states in the nation have an average tax bill over $9,000. Adding insult to injury, Illinois ranks poorly for return on tax dollars and tax help from accountants.
4. Connecticut
Average Annual State and Local Taxes: $9,099
Difference from National Average: 31 percent
Adjusted Rank by Cost of Living: 49
Connecticut ranks as the fourth worst state for taxpayers, with the average burden totaling $9,099. In comparison, Rhode Island is slightly better than average with an average tax bill of $6,905. Interestingly, a new report by Connecticut’s Department of Revenue Services finds that the 725,202 households that earn up to $48,000 a year paid $3.5 billion to state and local governments, while the 4,003 households with income of more than $2 million paid $1.9 billion. The report is to be used as a tool on tax policy and not necessarily a judgment to condemn the wealthy.
3. Nebraska
Average Annual State and Local Taxes: $9,450
Difference from National Average: 36 percent
Adjusted Rank by Cost of Living: 37
Nebraska ranks as the third worst state for taxpayers. The average burden for state and local taxes is $9,450. However, residents willing to make a move can find tax relief next door in Colorado, Wyoming, and South Dakota. Wyoming ranks best in the nation with an average tax bill of only $2,365, while Colorado is the 10th best at $5,674.
2. California
Average Annual State and Local Taxes: $9,509
Difference from National Average: 36 percent
Adjusted Rank by Cost of Living: 50
Sunshine and ocean waves come at a steep price. California ranks as the second worst state for taxpayers, with the average burden totaling $9,509. In comparison, Nevada has an average annual state and local tax bill of $3,370, third lowest in the nation. California is considering a tax overhaul that could increase revenue by $10 billion a year. Last year, voters in Berkeley passed the country’s first soda tax, charging consumers one penny per ounce on sugary drinks.
1. New York
Average Annual State and Local Taxes: $9,718
Difference from National Average: 39 percent
Adjusted Rank by Cost of Living: 51
New York ranks as the worst state in America for taxpayers. The average burden for state and local taxes is $9,718, which is 39% higher than the national average. Mayor Bill de Blasio recently proposed tax reform that would overhaul the nation’s corporate tax structure in an effort to provide relief to the city’s small businesses.
“These are common sense reforms that will modernize and streamline a corporate tax code that hasn’t seen real changes since the 1940s—serving taxpayers, businesses, and the City alike,” said Mayor Bill de Blasio. “By targeting relief to local small businesses and manufacturers, this will keep jobs here and expand economic opportunity. Together with a broadened tax base and the elimination of burdensome administration, this will mean a simpler, fairer system for all.”
This feature is adopted from CheatSheet.
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