Posted by: Richie Bernardo

On April 18, Uncle Sam will once again take his cut from everyone’s earnings this past year. And many taxpayers are already wondering what that haircut on their finances will look like. However, with such a complex tax code further convoluted by the way taxes are imposed on Americans based on their individual household characteristics, it’s hard to tell unless you wrote the tax policies yourself.

One simple ratio known as the “tax burden” helps cut through the confusion. Not to be confused with tax rates, which vary widely based on an individual’s particular circumstances, tax burden measures the exact proportion of total personal income that residents pay toward state and local taxes. And it isn’t uniform across the U.S., either.

To determine which states’ residents bear the biggest tax burdens, WalletHub’s analysts compared the 50 states across the three tax types that make up state tax burden — property taxes, individual income taxes, and sales and excise taxes — as a percentage of total personal income in the state. Read on for our findings, commentary from a panel of tax experts and a full description of our methodology.

1. Main Findings
2. Red States vs. Blue States
3. Ask the Experts
4. Methodology

Main Findings

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Overall Rank	State	Total Tax Burden (%)	Property Tax Burden (%)	Individual Income Tax Burden (%)	Total Sales & Gross Receipts Tax Burden (%)
49	Delaware	5.91%	1.84%	2.86%	1.21%
50	Alaska	5.18%	3.73%	0.00%	1.45%

 

Red States vs. Blue States

 

Ask the Experts

For more insight on the differences in state tax policies, we asked a panel of taxation experts to weigh in with their thoughts on the following key questions:

1. What state and local tax instruments are most fair? Least fair?
2. What’s the relationship between state tax burden and economic growth?
3. Should states and localities tax property at different marginal rates like income?
4. What makes some state and local tax systems better able to weather economic downturns?

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• David R. Shock Professor of Political Science in the Department of Political Science & International Affairs at Kennesaw State University
• Scott Lazenby Adjunct Associate Professor in the Mark O. Hatfield School of Government at Portland State University
• Jack Pinkowski Associate Professor in the Department of Public Administration and Director of the Center for Leadership at the Nova Southeastern University, H. Wayne Huizenga College of Business & Entrepreneurship
• David Kersten President of the Kersten Institute for Governance & Public Policy, and Adjunct Professor at University of San Francisco School of Management
• Paul Helmke Professor of Practice and Director of the Civic Leaders Center at Indiana University at Bloomington
• Can Chen Assistant Professor of Public Budgeting and Finance in the Department of Public Administration at Florida International University, Steven J. Green School of International and Public Affairs
• David Brunori Research Professor of Public Policy and Public Administration in the Trachtenberg School of Public Policy and Public Administration at George Washington University
• Robert M. Stein Lena Gohlman Fox Professor in the Department of Political Science at Rice University
• Catherine C. Reese Professor of Public Administration in the Department of Political Science at Arkansas State University

David R. Shock Professor of Political Science in the Department of Political Science & International Affairs at Kennesaw State University Some states bring in much less tax revenue than others, relative to the total taxable resources available in the state. Should the federal government provide less assistance to states that refuse to tax their own more? I do not believe there should be such as penalty. A problem would be coming up with a formula for penalizing states. Canada has an "equalization" grant program providing extra funds to provinces falling below national averages in terms of wealth and taxable resources. The U.S. does not have a similar formula, but I guess, could create one. I do not believe though it is politically feasible to do so. So, if there was a formula, I'd base it on wealth rather than the amount of taxes generated. What state and local tax instruments are most fair? Least fair? The income tax is generally viewed as being the most fair tax because it is based on ability to pay. Higher income individuals can afford to pay higher dollar amounts in taxes. The least fair tax is the sales tax - specifically sales taxes levied on life's necessities, such as food purchased in grocery stores. There is large variation across the country in terms of state/local tax burdens on the poor. The poor often pay a higher percentage of their wages in state and local taxes in southern states because these states (e.g., Alabama, Tennessee, etc.) levy sales taxes on grocery items. States, such as California, do not. The variations in the use of income and sales taxes reflects the "red" and "blue" state divide in the country. Republican states prefer "consumption" taxes - such as sales taxes - whereas Democratic states tend to focus more on income taxes. What makes some state and local taxes systems better able to weather economic downturns? No tax system is 100% immune from economic downturns. Generally speaking, states that have a diversity of different sources do better. For instance, a state with a modest income tax (maybe in the 3 - 5% range), a broad sales tax that includes services but may exclude grocery store food items, and a mix of other fees tend to do better. States focusing heavily on high income earners (such as California) or states focusing on sales taxes targeting tourists (e.g., Nevada) will get hit harder during a recession than states with broader, lower tax rates. With that said though, the bigger problem for states is on the "spending" side. States that do better managing during recessions tend to have conservative budgeting practices and realistic pensions for public employees. States such as Kentucky and Illinois are in deep trouble because they failed to create and maintain realistic pensions. The pensions are now devouring the state budgets and there is not an easy way to change those obligations. How do American notions of economic mobility inform tax preferences and tax policy? Upper-middle class areas tend to prefer sales taxes to fund local services over income and property taxes. Lower income individuals will likely benefit from a system that focuses more on taxing income rather than consumption. There is no simple answer to this question though. There are many high income individual (often living in the "blue" states) willing to pay more in income and other taxes to help the poor, while many others, particularly upper middle class individuals in suburban areas around cities such as Atlanta, prefer sales taxes to fund services and infrastructure. Scott Lazenby Adjunct Associate Professor in the Mark O. Hatfield School of Government at Portland State University Some states bring in much less tax revenue than others, relative to the total taxable resources available in the state. Should the federal government provide less assistance to states that refuse to tax their own more? The state governments interfere to varying degrees with the taxation policies of local governments, but this doesn't justify the national government doing it to the states. The national government shouldn't backfill where states choose lower levels of taxation, but instead distribute funds equitably based on need (e.g., lane miles of interstate freeways, number of eligible Medicaid recipients, etc.). What state and local tax instruments are most fair? Least fair? Fairness is in the eye of the beholder. There is a rich literature on tax burden and the design of tax systems that meet varying policy objectives. Instead of letting special interest groups dominate the design of revenue systems, legislatures should set the amount they need to raise, identify the values of the system (degree of progressivity, etc.), and then allow an independent commission to craft the specifics. What makes some state and local taxes systems better able to weather economic downturns? Property tax is probably the most stable, followed by income tax and then sales tax. But sales tax doesn't need to be as volatile as it often is. Exempting groceries, for example, is a serious mistake. True, people have to eat, but people have a great deal of discretion over their grocery budget. Food stamps or income tax credits can keep the sales tax from being regressive. Having a diversified tax portfolio helps, too. States like Pennsylvania use a wide variety of taxes, all at moderate rates (the last I looked, which is a few decades ago). How do American notions of economic mobility inform tax preferences and tax policy? Where I live, there is some evidence that a few people choose to live across the river in a state that doesn't tax income, and drive across the bridge to do their shopping in a state that doesn't tax sales. But overall, I doubt state and local tax policies have much effect on our choice of where to live, and if there is any rationality at all to the design of the tax system, it isn't based on mobility. Jack Pinkowski Associate Professor in the Department of Public Administration and Director of the Center for Leadership at the Nova Southeastern University, H. Wayne Huizenga College of Business & Entrepreneurship Some states bring in much less tax revenue than others, relative to the total taxable resources available in the state. Should the federal government provide less assistance to states that refuse to tax their own more? The question about state tax revenue and federal revenue sharing speaks principally to the Federal system of government. In the Federal system, the states give up some power to the national level of government that the states believe will be better handled by the national level, or which involves interstate or foreign activities and responsibilities. A key component of taxation systems relate to public choice. For example, local governments rely on property taxation to fund schools. To the extent that the community is willing to support the tax burden, that is, the financial support for the schools is directly related to what they desire. The desire comes from income demographics, educational attainment, the number of retired persons without school age children and, of course, the extent of the tax base to support property ad valorem taxation. Sales taxes rely on economic exchanges instead of property ownership and are a key way to transfer the economic support for community services to people beyond the permanent residents of the community of voters. By that I mean, especially in Florida that relies on sales taxes - people that don’t live in Florida but who visit Florida support the services that they enjoy while in the state, e.g., public safety, roads, ports, airports, hospitals and emergency services, etc. Taxing those visitors through sales taxes helps the nonresidents, who don’t vote for the legislators who decide the tax rate, and allows the residents to pay lower taxes to support those services. But it is also fair for those nonresident-visitors that they pay in some way to support the services that they enjoy while they’re here, but otherwise would not pay. So the fact that some states have less tax revenue than others relative to total taxable resources, as in your question, does not mean that the federal government should take over state and local taxation to make the rates, or revenue, more uniform. By its very nature, the state systems allow services to be provided based upon both the needs and the resources that are germane to those states. Clearly, states with less population have very different needs and capacity than states with very dense or urban populations. What state and local tax instruments are most fair? Least fair? The question of tax fairness is an interesting one because basically it is not always intended to be fair. That is to say, isn’t it unfair to tax some people more than other people? The answer is that in a progressive system of taxation, the presumption is that more ability to pay should relate to more taxation. And so that a system is not regressive, a burden should not be put on low income households merely so that the rate, or the tax, would be the same for all taxpayers. We intentionally use a redistributive tax model that takes money from some people and gives it to other people, that is, from each according to the ability to pay and to each according to their need. This is literally unfair, but we believe that it is a fair system of taxation in a democratic society. High property tax values might be associated with high taxes. Is that fair? If the high property tax values relate to a highly educated community that desires greater financial resources for public education systems, it would be totally fair that they choose to pay more to have better schools. The sales tax is often criticized as being regressive. This translates to an example of the tax on a gallon of milk for a family of four people. The tax on the single gallon of milk necessary for the family table is the same for the person making $8 dollars an hour as it is for the corporate titan receiving millions of dollars of compensation. Is that fair? It is regressive because the burden on the lower income household is a greater portion of their resources than for the taxpayer with the same need (the gallon of milk) but far less impact by virtue of the tax. Estate taxes presume that were there is wealth, upon the taxpayers death, that there is capacity for the heirs to pay taxes. But imagine if a house that could be sold for $1 million today was purchased in the 1940s by the deceased for $30,000, does that mean that the person living in the house has $1 million of income? It may simply be due to property values that have increased over time because of the market, or the location, and not necessarily because of any association with income. So, is it fair to make an heir pay taxes with money that they don’t have? They may have to sell the house because they cannot pay the estate taxes. Sometimes legislators impose excise taxes on luxury goods. The presumption is that someone who could afford the luxury goods has the ability to pay more tax, or contribute more to community coffers. This has been demonstrated as wrong-thinking because such taxes are not totally elastic. That means that people can modify their behavior to avoid the tax. When excise tax was placed on high-priced yachts, yacht repair and sales were reduced in the community. This yielded less revenue simply because yacht buyers and owners changed their behavior by buying boats and services in other jurisdictions, beyond the reach of the new excise tax. Local businesses and employment suffered as a result and the tax was repealed. What makes some state and local taxes systems better able to weather economic downturns? Whether state and local taxes are flexible in relation to economic cycles, has to do to a great extent with whether the needs for services is directly related to those cycles as well. Local taxes and state taxes are established by local and state legislators each year. During downturns when there is less capacity, the legislators can decide on a lower rate and provide reduced services. Sales taxes directly flow in-line with the economic cycles. Where there’s more commerce, more sales are generated. When sales go down, less tax is provided because it is associated with a lower rate of sales. Consequently it would be better to allocate sales tax revenue to fund services that are changeable rather than fixed. That becomes a problem with property because the ownership of property is not related to an economic transfer, that is, if the economy goes down, property values could still go up due to markets. And yet school buildings cannot be moved or closed when there are students in need of education just because the economy went down. In those cases, financial support must be shifted amongst priorities within the local governments based upon their ability to raise taxes and obligation to provide services. How do American notions of economic mobility inform tax preferences and tax policy? The American notion of economic mobility is directly related to the concept referred to as taxpayers walking with their feet. These theories are called public choice and rely on the ability of the taxpayer to move to a different jurisdiction where the packages of services and tax burdens are more suitable to their needs, desires, and personal financial situation. So getting back to your first question, it is essential that we maintain local control at the state and local level for taxation that is appropriate for what is desired in those local jurisdictions. This cannot be mandated by the national level of government and should be different based upon competing, individual preferences. David Kersten President of the Kersten Institute for Governance & Public Policy, and Adjunct Professor at University of San Francisco School of Management Some states bring in much less tax revenue than others, relative to the total taxable resources available in the state. Should the federal government provide less assistance to states that refuse to tax their own more? Transfers to state and local governments are a complex issue. But in general I would say that the level of state and local taxes should have no impact on how much money is transferred back to state and local governments by the federal government. This is because the feds control the federal tax sources, so they hypothetically raise an equal amount or “fair amount” of tax dollars from each state and locality. There have been some issues where some states “net” more federal dollars than they pay in taxes, and other states believe that to be unfair. What state and local tax instruments are most fair? Least fair? In general, taxes are evaluated according to several generally accepted principles. The two most important are tax equity and tax fairness, which mean that taxpayers in similar positions should be treated fairly. There is also a partisan divide on progressive versus regressive taxes. Conservatives tend to believe in a method of “flat taxation” where every taxpayer pays the same amount of their income in taxes, while liberals believe that the rich should pay a higher percentage. Each tax really varies on these principles, and other considerations, and it’s tough to generalize across all taxes. Income taxes tend to be the biggest source of revenue for state and federal governments, and tend to be at least somewhat progressive. Some states have a lot higher rates on the wealthy than others, while others have “flatter” brackets. Sales taxes are another major revenue source for state and local governments, and in some respects tax everyone equally, but could be argued to be “regressive” since the poor buy a greater portion of taxable goods, and therefore pay a higher percentage of their income. I would argue that property taxes are likely the most fair since they tax the value of a property, which tend to be paid by more well-off taxpayers. There are a whole host of other taxes and fees that could be evaluated across these criteria and others. What makes some state and local taxes systems better able to weather economic downturns? This is what is called the “volatility issue.” Tax revenues are essentially driven by the economy, and some tax sources are a lot more susceptible to steep declines when the economy tanks and larger increases when the economy grows. Income taxes are the most volatile, particularly capital gains, followed by sales taxes. Property taxes are the most stable. So tax systems that rely mostly on property and sales taxes, for example, would be considered more stable, as well as states with “flatter” income taxes, because most of the volatility is in the higher brackets. Paul Helmke Professor of Practice and Director of the Civic Leaders Center at Indiana University at Bloomington Some states bring in much less tax revenue than others, relative to the total taxable resources available in the state. Should the federal government provide less assistance to states that refuse to tax their own more? While the federal government may have some responsibility to assist with some issues which are primarily of national concern regardless of how much individual states contribute, states should be expected to contribute their share to issues which involve both the state and the nation. When states refuse to do their part by taxing their own, they should not expect the federal government to tax citizens in other states to pay for their refusal to do their part. What state and local tax instruments are most fair? Least fair? Most people seem to prefer the old political axiom of "Don't tax you and don't tax me, tax that fellow behind the tree" and believe the fairest tax is the one that someone else pays. I have always felt that the best approach at the state and local level is to have a mix of property, income, and sales taxes along with some user fees. This helps get people who live in an area, work in an area, and shop in an area, as well as use specific services - the people who benefit from government services - to all pay for the government that serves the area. What makes some state and local taxes systems better able to weather economic downturns? Having a mix of tax sources is the best way for a government to weather an economic downturn (as well as take advantage of an economic boom). A falling economy may reduce income and sales tax revenues, but property taxes are likely to be a bit more stable. These property taxes are likely to remain relatively flat in a growing economy, but income and sales taxes boom might better reflect that growth. How do American notions of economic mobility inform tax preferences and tax policy? While there is some basis for the argument that people and businesses will move to areas with lower taxes, my experience is that this is just one of many factors that impact these mobility decisions. Individuals and the businesses who hire them want good schools, safe neighborhoods, sound infrastructure, and the many other things that higher taxes can help provide. Taxes can be too high, but they can also be too low. In addition, the costs of moving, connections to place, and uncertainties connected with mobility, often make tax policy less of a factor than many politicians recognize. Can Chen Assistant Professor of Public Budgeting and Finance in the Department of Public Administration at Florida International University, Steven J. Green School of International and Public Affairs Some states bring in much less tax revenue than others, relative to the total taxable resources available in the state. Should the federal government provide less assistance to states that refuse to tax their own more? It depends. The amounts of federal assistance to states rely on many considerations, including the state’s own tax capacity, social-demographic characteristic, and the categories and purposes of federal grant programs. For example, federal redistribution social welfare programs may provide more assistance to states with poor residents and communities. These poor states usually have less developed economy and therefore less tax capacity. The main purpose of federal redistribution programs is to help poor states overcome limited tax capacity and operate federally-assisted programs. What state and local tax instruments are most fair? Least fair? In my view, state personal income tax is the most fair tax among state and local tax instruments because it is a progressive tax based solely on ability to pay. But, in reality, state personal income taxes vary in fairness due to differences in tax rates, deductions, and exemptions across states. Sales and excise taxes are the most regressive taxes because these taxes hit lower-income individuals harder. In the US, food and transportation are two of the largest expenses for low-income families. I believe taxing food and gasoline are the least fair taxes. In addition, due to technology development, electric and hybrid vehicle owners do not pay their fair share of taxes for using roads. What makes some state and local taxes systems better able to weather economic downturns? Revenue diversification is an effective tool for state and local tax systems to use during recessions, in order to weather economic downturns and stabilize their revenue flows. Revenue diversification is the degree to which state and local government take advantage of various tax sources (e.g., personal income tax, corporate income tax, sales tax, property tax, license tax, gas tax, and severance and other miscellaneous smaller taxes) rather than reliance on a few or one in particular. It can help governments mitigate revenue shortfalls and volatility during periods of economic recessions. Additionally, in the long run, revenue diversification can help states overcome the state-imposed fiscal constraints, such as tax expenditure limits and balanced budget requirements. How do American notions of economic mobility inform tax preferences and tax policy? Economic mobility is the ability of individuals to move up or down the income distribution. Traditionally, Americans do believe that through hard work, the poorest people can move up to middle class or above. Compared with many European countries, Americans tend to support lower tax or flat tax for the rich. In addition, education, professional work training, technology development, and personal savings enhance the opportunity for upward economic mobility. Americans do often favor tax credit and tax subsidy programs to support government spending on these areas. David Brunori Research Professor of Public Policy and Public Administration in the Trachtenberg School of Public Policy and Public Administration at George Washington University Some states bring in much less tax revenue than others, relative to the total taxable resources available in the state. Should the federal government provide less assistance to states that refuse to tax their own more? Federal aid does not consist of a big pot of money to be doled out. While politically, some think you could "punish" states that do not raise enough taxes, it really does not work that way. Transportation, health, education, and welfare money are handed out by formulas. You can't just cut those funds without changing the formulas for every state. So the answer is no. What state and local tax instruments are most fair? Least fair? Most public finance experts believe that regressive taxes are least fair. State systems are decidedly regressive because of a heavy reliance on consumption taxes (general sales and excise). The fairest taxes, from an ability to pay perspective, are those on personal income. What makes some state and local taxes systems better able to weather economic downturns? Again, most public finance experts believe that tax systems with a broad base and low rates (tax everything at low rates) are the most stable. Then, it is important to impose a diversified set of taxes on sales, income, and property. Property and sales taxes are less volatile than those on income. How do American notions of economic mobility inform tax preferences and tax policy? Immensely. There is a political belief, real or perceived, that high tax burdens lead to outward migration. In the long term, this has proven to be true, although the extent of the migration is subject to much debate. Robert M. Stein Lena Gohlman Fox Professor in the Department of Political Science at Rice University Some states bring in much less tax revenue than others, relative to the total taxable resources available in the state. Should the federal government provide less assistance to states that refuse to tax their own more? There is an extensive literature on the representative tax system that considers what the capacity of a state or substate jurisdiction is and how much of that capacity is used/taxed i.e., relative effort. The U.S. Advisory Commission on Intergovernmental Relations did much of the work measuring capacity and effort and it was part of the debate on whether federal funding for the distribution of aid programs should be pegged to some index of tax capacity and effort. This was largely a political debate, often pitting states with large natural resources e.g., coal, timber against states lacking these taxable commodities and relying on property, sales, personal and business taxes. Many of the 2000+ federal domestic assistance programs in (see U.S. Catalog of Federal Domestic Assistance) allocate federal moneys on formulas and criteria that incorporate some measures/indices of fiscal and programmatic effort. The General Revenues Sharing Program of the 1970s used these criteria. The political debate centered on issues of income redistribution and whether the federal government was intruding on state and local authority and preferences. What state and local tax instruments are most fair? Least fair? The two largest sources of state and local revenues from taxation are sales and property taxes. The RTS measure attempted to define ‘fair’ as when a jurisdiction taxes its existing capacity in a manner comparable to other jurisdictions e.g., within a standard deviation of the national average. Other notions of equity include the notion of progressiveness where a higher rate of taxation is imposed on individuals et al as their ‘taxable income’ rises. Flat or uniform taxes on personal spending as in sales taxes tend to treat the poor and wealthy in the same manner, which fails to take into consideration their differential capacity to pay and the benefits they receive from the tax. Property taxes are levied on home value but the tax is paid from personal income, again, that may vary in a manner that does not correlate with home values as in the case of the elderly who are retired and pay taxes from fixed pension incomes. Sales and property taxes are considered regressive/non-progressive. Provisions are added to exempt sales taxes on ‘essential’ and non-discretionary spending e.g., drugs and food. Property taxes are made less regressive especially for the elder on fixed incomes by providing tax rate and assessment exemptions for those over 65. What makes some state and local taxes systems better able to weather economic downturns? Great diversification of tax revenue sources, which is, in part, a function of what’s available for taxation, e.g., natural resources and tourism, provides states and locales with greater hedges against economic downturns. Texas and other oil producing states are good examples of jurisdictions that get caught in oil downturns with little other sources of revenues. Catherine C. Reese Professor of Public Administration in the Department of Political Science at Arkansas State University Some states bring in much less tax revenue than others, relative to the total taxable resources available in the state. Should the federal government provide less assistance to states that refuse to tax their own more? I do not see that the data (from the Tax Policy Center) referenced total available taxable resources, only that they indicate the relative standing of states as far as overall tax rates go; these are not the same thing. The data have other distinct limitations as regards major individual taxes as well. For example, comparing all states on sales tax rates without considering sales tax base is disingenuous, in my view. In the State of Arkansas, one of the greatest achievements of a governor in recent history is when Mike Beebe exempted groceries from the sales tax base. He had a great deal of opposition on this, yet I am confident that what he did for the residents of the state will stand in history as one of the most significant events of the 21st Century. The equity stance of the sales tax almost completely depends upon whether groceries are taxed or not. Therefore, comparing state rates without considering bases makes no sense. In addition, the sales tax rates even among states that do not tax groceries can be difficult to compare. Relatedly, comparing states on sales tax rates without considering overall local sales tax rates across the individual states is misleading as well. The State of Tennessee, for instance, is rated in the TPC data at the bottom of overall tax burden. This may be true, but the sales tax data in itself is difficult to reconcile when one knows that the sales tax rate is, for example, 9.25% in the City of Memphis, the 23rd largest and one of the poorest cities in the USA. As far as the second part of the question goes, the largest reason we use a grant system at the national level is to redistribute income from poor to rich states, so overall, I would say “No” to that part of the question. This data, again, do not in my view support the assumptions behind the question. What state and local tax instruments are most fair? Least fair? Clearly the fairest state/local tax instrument by ability-to-pay (ATP) equity standards, and that is the most common standard used in evaluating public revenue sources, is the income tax. The income tax allows for differences in individual household circumstances, as any of us who do our own taxes can attest, and it is also progressively designed. In its progressively-structured design, the income tax in this country, by definition, taxes the wealthier households at a higher rate than the poorer households. If we are committed as a nation to helping those who are poor and downtrodden, this is the kind of standard to which we should aspire for all of our primary revenue sources. On the other hand, the least fair tax instrument is the sales tax when groceries are not exempt. This tax does nothing to differentiate ATP among households. Naturally, then, the property tax falls somewhere in the middle. What makes some state and local taxes systems better able to weather economic downturns? Economic diversity as well as flexible public budgeting methods. The State of Arkansas, for instance, although small, has been an economic model during the last decade or more. There were very few repercussions from the economic downturn, relative to the other 49 states. Part of the reason is that the state continues to maintain a great amount of manufacturing in its economy, in addition to service- and knowledge-based concerns. In addition, in Arkansas there is an extremely unusual yet effective public budgeting method called the Revenue Stabilization Act. This act is passed biennially, and ensures that laws that are passed are only conditionally funded. While difficult for those funded (or not), the process operates to ensure that the state as a whole remains in good fiscal condition. How do American notions of economic mobility inform tax preferences and tax policy? I suppose that we do assume in some ways that most U.S. citizens can move to escape high taxes. But more importantly, economic mobility does not really apply to poor Americans, does it? One of our largest tax preferences is for the home mortgage interest deduction, instituted after WWII. This revenue forgone is one of the larger sources of income inequality in the federal tax code.

Methodology

In order to determine the states that tax their residents the most and least aggressively, WalletHub’s analysts compared the 50 states across the following three tax burdens and added the results to obtain the overall tax burden for each state:

• Property Tax as a Share of Personal Income
• Individual Income Tax as a Share of Personal Income
• Total Sales & Excise Tax as a Share of Personal Income

 

Sources: Data used to create this ranking were collected from the Tax Policy Center.

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