Posted by: John S Kiernan

Tax season can be stressful for the millions of Americans who owe money to Uncle Sam. Every year, the average U.S. household pays more than $5,700 in federal income taxes, according to the Bureau of Labor Statistics. And while we’re all faced with that same obligation, there is significant difference when it comes to state and local taxes. Taxpayers in the most tax-expensive states, for instance, pay three times more than those in the cheapest states.

Surprisingly, though, low income taxes don’t always mean low taxes as a whole. For example, while the state of Washington’s citizens don’t pay income tax, they still end up spending over 8% of their annual income on sales and excise taxes. Texas residents also don’t pay income tax, but spend 1.86% of their income on real estate taxes, one of the highest rates in the country. Compare these to California, where residents owe a little over 4% of their income in sales and excise taxes, and just 0.79% in real estate tax.

As this year’s tax-filing deadline, April 17, comes closer, it’s fair to wonder which states give their taxpayers more of a break. WalletHub searched for answers by comparing state and local tax rates in the 50 states and the District of Columbia against national medians. To illustrate, we calculated relative income-tax obligations by applying the effective income-tax rates in each state and locality to the average American’s income. Scroll down for the complete ranking, commentary from a panel of tax experts and a full description of our methodology.

1. Main Findings
2. Red States vs. Blue States
3. State & Local Tax Breakdown
4. Ask the Experts: Best Tax Advice
5. Methodology

 

Main Findings

Embed on your website<iframe src="//d2e70e9yced57e.cloudfront.net/wallethub/embed/2416/taxpayer1.html" width="556" height="347" frameBorder="0" scrolling="no"></iframe> <div style="width:556px;font-size:12px;color:#888;">Source: <a href="https://ift.tt/2FLuMd4>  

Taxes by State

Overall Rank (1=Lowest)	State	Effective Total State & Local Tax Rates on Median U.S. Household*	Annual State & Local Taxes on Median U.S. Household*	% Difference Between State & U.S. Avg.**	Annual State & Local Taxes on Median State Household***	Adjusted Overall Rank (based on Cost of Living Index)
1	Alaska	5.67%	$3,164	-47.26%	$4,353	5
2	Delaware	6.11%	$3,407	-43.21%	$3,909	1
3	Montana	7.29%	$4,066	-32.23%	$3,911	4
4	Nevada	7.44%	$4,145	-30.90%	$4,103	6
5	Wyoming	7.45%	$4,155	-30.75%	$4,417	2
6	Tennessee	7.98%	$4,449	-25.84%	$3,667	3
7	Idaho	8.48%	$4,730	-21.16%	$4,216	7
8	California	8.77%	$4,888	-18.51%	$7,167	36
9	Florida	8.83%	$4,921	-17.97%	$4,373	9
10	South Carolina	9.02%	$5,030	-16.16%	$4,278	11
11	Oregon	9.20%	$5,129	-14.51%	$5,677	34
12	Utah	9.23%	$5,144	-14.25%	$5,902	10
13	Colorado	9.27%	$5,170	-13.82%	$6,100	13
14	Alabama	9.40%	$5,241	-12.64%	$4,177	8
15	Arizona	9.50%	$5,299	-11.67%	$4,977	12
16	South Dakota	9.75%	$5,439	-9.34%	$4,757	16
17	North Dakota	9.84%	$5,488	-8.53%	$5,493	18
18	District of Columbia	10.00%	$5,574	-7.09%	$8,811	46
19	New Hampshire	10.27%	$5,725	-4.57%	$7,221	33
20	Hawaii	10.33%	$5,762	-3.96%	$8,277	51
21	West Virginia	10.39%	$5,791	-3.48%	$4,343	19
22	Louisiana	10.39%	$5,795	-3.41%	$4,757	17
23	Georgia	10.54%	$5,876	-2.06%	$5,237	14
24	North Carolina	10.64%	$5,934	-1.09%	$5,167	20
25	Oklahoma	10.75%	$5,993	-0.11%	$4,848	15
26	New Mexico	10.82%	$6,031	0.53%	$5,038	23
27	Virginia	10.87%	$6,061	1.03%	$7,276	27
28	Texas	11.04%	$6,156	2.61%	$5,347	21
29	Vermont	11.04%	$6,158	2.64%	$6,800	41
30	Missouri	11.28%	$6,291	4.86%	$5,435	22
31	Minnesota	11.57%	$6,453	7.56%	$7,085	31
32	Massachusetts	11.61%	$6,470	7.85%	$9,390	45
33	Washington	11.68%	$6,514	8.57%	$8,023	37
34	Maine	11.75%	$6,554	9.24%	$6,133	42
35	Indiana	11.86%	$6,614	10.25%	$5,667	26
36	Maryland	11.96%	$6,666	11.12%	$9,552	44
37	Kentucky	12.06%	$6,723	12.06%	$5,293	29
38	Mississippi	12.21%	$6,810	13.51%	$4,954	24
39	Arkansas	12.30%	$6,858	14.32%	$5,142	25
40	Kansas	12.42%	$6,924	15.41%	$6,104	28
41	Pennsylvania	12.45%	$6,940	15.68%	$6,642	38
42	Michigan	12.81%	$7,145	19.09%	$5,843	30
43	New Jersey	12.87%	$7,175	19.59%	$11,237	47
44	Iowa	12.92%	$7,202	20.05%	$6,354	32
45	Ohio	13.09%	$7,300	21.68%	$6,081	35
46	Wisconsin	13.62%	$7,593	26.56%	$7,193	40
47	Rhode Island	13.69%	$7,634	27.26%	$8,697	48
48	New York	13.72%	$7,648	27.49%	$9,759	50
49	Nebraska	13.83%	$7,712	28.55%	$6,776	39
50	Connecticut	13.85%	$7,720	28.68%	$10,419	49
51	Illinois	14.89%	$8,299	38.34%	$8,330	43

*Assumes “Median U.S. Household” has an annual income of $55,754 (mean third quintile U.S. income); owns a home valued at $184,700 (median U.S. home value); owns a car valued at $24,000 (the highest-selling car of 2017); and spends annually an amount equal to the spending of a household earning the median U.S. income. **National Average of State and Local Tax Rates = 10.76%***Assumes “Median State Household” has an annual income equal to the mean third quintile income of the state; owns a home at a value equal to the median of the state; owns a car valued at $24,000 (the highest-selling car of 2017); and spends annually an amount equal to the spending of a household earning the median state income.

 

Red States vs. Blue States

 

State & Local Tax Breakdown

All effective tax rates shown below were calculated as a percentage of the mean third quintile U.S. income of $55,754 and based on the characteristics of the Median U.S. Household*.

State	Effective Real-Estate Tax Rate	Real-Estate Tax Rank ($)	Effective Vehicle Property Tax Rate	Vehicle Property Tax Rank ($)	Effective Income Tax Rate	Income Tax Rank ($)	Effective Sales & Excise Tax Rate	Sales & Excise Tax Rank ($)	Effective Total State & Local Tax Rates on Median U.S. Household*
Alabama	1.42%	2($791)	0.29%	28($163)	2.68%	28($1,494)	5.01%	39($2,793)	9.40%
Alaska	3.93%	33($2,190)	0.00%	1($0)	0.10%	6($56)	1.65%	4($918)	5.67%
Arizona	2.56%	16($1,427)	0.72%	38($403)	1.57%	13($873)	4.66%	35($2,595)	9.50%
Arkansas	2.08%	10($1,161)	0.43%	29($239)	2.66%	27($1,483)	7.13%	50($3,975)	12.30%
California	2.62%	17($1,461)	0.28%	27($156)	1.40%	11($781)	4.47%	30($2,491)	8.77%
Colorado	1.90%	7($1,058)	0.77%	40($428)	2.54%	25($1,414)	4.07%	24($2,269)	9.27%
Connecticut	6.70%	48($3,733)	1.09%	47($609)	2.25%	19($1,255)	3.81%	18($2,123)	13.85%
Delaware	1.81%	4($1,009)	0.00%	1($0)	3.03%	33($1,689)	1.27%	3($708)	6.11%
District of Columbia	1.84%	5($1,026)	0.00%	1($0)	3.72%	46($2,072)	4.44%	28($2,475)	10.00%
Florida	3.38%	27($1,885)	0.00%	1($0)	0.00%	1($0)	5.45%	44($3,037)	8.83%
Georgia	3.07%	25($1,712)	0.00%	1($0)	3.17%	35($1,768)	4.30%	26($2,396)	10.54%
Hawaii	0.90%	1($501)	0.00%	1($0)	3.85%	47($2,147)	5.59%	46($3,115)	10.33%
Idaho	2.52%	13($1,404)	0.00%	1($0)	2.13%	16($1,185)	3.84%	20($2,141)	8.48%
Illinois	7.69%	50($4,288)	0.00%	1($0)	2.82%	30($1,572)	4.37%	27($2,439)	14.89%
Indiana	2.88%	23($1,606)	0.54%	33($300)	3.71%	45($2,068)	4.73%	36($2,640)	11.86%
Iowa	4.95%	38($2,762)	0.43%	30($240)	3.03%	34($1,691)	4.50%	31($2,509)	12.92%
Kansas	4.63%	37($2,580)	0.89%	43($495)	1.78%	15($994)	5.12%	40($2,855)	12.42%
Kentucky	2.83%	21($1,579)	0.52%	31($292)	4.87%	51($2,716)	3.83%	19($2,135)	12.06%
Louisiana	1.68%	3($934)	0.04%	25($24)	2.17%	18($1,212)	6.50%	49($3,624)	10.39%
Maine	4.38%	35($2,444)	1.03%	45($576)	2.54%	26($1,416)	3.80%	17($2,117)	11.75%
Maryland	3.64%	31($2,030)	0.00%	1($0)	4.30%	49($2,395)	4.02%	23($2,241)	11.96%
Massachusetts	4.01%	34($2,238)	0.97%	44($540)	3.67%	44($2,046)	2.95%	6($1,646)	11.61%
Michigan	5.66%	43($3,158)	0.25%	26($142)	3.32%	37($1,850)	3.58%	11($1,995)	12.81%
Minnesota	3.86%	32($2,155)	0.56%	35($311)	2.94%	32($1,640)	4.21%	25($2,347)	11.57%
Mississippi	2.64%	19($1,470)	1.46%	49($813)	2.34%	21($1,303)	5.78%	47($3,224)	12.21%
Missouri	3.30%	26($1,842)	1.08%	46($600)	2.91%	31($1,625)	3.99%	22($2,224)	11.28%
Montana	2.82%	20($1,570)	0.55%	34($307)	2.76%	29($1,541)	1.16%	2($646)	7.29%
Nebraska	6.05%	45($3,371)	0.69%	36($383)	2.53%	24($1,410)	4.57%	32($2,548)	13.83%
Nevada	2.56%	15($1,425)	0.76%	39($423)	0.53%	8($295)	3.59%	12($2,002)	7.44%
New Hampshire	7.24%	49($4,038)	0.77%	41($432)	0.60%	9($335)	1.65%	5($920)	10.27%
New Jersey	7.96%	51($4,437)	0.00%	1($0)	1.40%	11($781)	3.51%	9($1,957)	12.87%
New Mexico	2.53%	14($1,408)	0.00%	1($0)	2.16%	17($1,204)	6.13%	48($3,419)	10.82%
New York	5.48%	42($3,057)	0.00%	1($0)	3.49%	40($1,945)	4.75%	37($2,647)	13.72%
North Carolina	2.84%	22($1,581)	0.54%	32($299)	3.62%	43($2,018)	3.65%	15($2,035)	10.64%
North Dakota	3.49%	28($1,947)	0.00%	1($0)	0.78%	10($432)	5.58%	45($3,108)	9.84%
Ohio	5.18%	40($2,890)	0.00%	1($0)	3.34%	38($1,862)	4.57%	33($2,548)	13.09%
Oklahoma	2.94%	24($1,638)	0.00%	1($0)	2.44%	23($1,360)	5.37%	42($2,994)	10.75%
Oregon	3.53%	30($1,970)	0.00%	1($0)	4.74%	50($2,640)	0.93%	1($519)	9.20%
Pennsylvania	5.14%	39($2,867)	0.00%	1($0)	3.90%	48($2,174)	3.40%	8($1,898)	12.45%
Rhode Island	5.46%	41($3,047)	2.05%	51($1,144)	2.30%	20($1,282)	3.88%	21($2,162)	13.69%
South Carolina	1.89%	6($1,056)	1.17%	48($651)	2.35%	22($1,310)	3.61%	14($2,013)	9.02%
South Dakota	4.39%	36($2,446)	0.00%	1($0)	0.00%	1($0)	5.37%	41($2,992)	9.75%
Tennessee	2.47%	12($1,376)	0.00%	1($0)	0.10%	6($56)	5.41%	43($3,017)	7.98%
Texas	6.16%	46($3,435)	0.00%	1($0)	0.00%	1($0)	4.88%	38($2,720)	11.04%
Utah	2.22%	11($1,240)	0.00%	1($0)	3.35%	39($1,869)	3.65%	15($2,035)	9.23%
Vermont	5.89%	44($3,285)	0.00%	1($0)	1.61%	14($896)	3.55%	10($1,977)	11.04%
Virginia	2.63%	18($1,467)	1.74%	50($971)	3.49%	41($1,947)	3.00%	7($1,675)	10.87%
Washington	3.52%	29($1,962)	0.00%	1($0)	0.00%	1($0)	8.16%	51($4,552)	11.68%
West Virginia	1.94%	8($1,082)	0.71%	37($398)	3.29%	36($1,833)	4.44%	29($2,478)	10.39%
Wisconsin	6.46%	47($3,602)	0.00%	1($0)	3.56%	42($1,985)	3.60%	13($2,006)	13.62%
Wyoming	2.03%	9($1,130)	0.77%	41($432)	0.00%	1($0)	4.65%	34($2,593)	7.45%

*Assumes “Median U.S. Household” has an income equal to $55,754 (mean third quintile U.S. income); owns a home valued at $184,700 (median U.S. home value); owns a car valued at $24,000 (the highest-selling car of 2017); and spends annually an amount equal to the spending of a household earning the median U.S. income.

 

Ask the Experts: Best Tax Advice

For more insight into the impact state and local taxes have on migration and public policy, we turned to a panel of leading tax and policy experts. You can check out their bios and responses below.

1. Do people usually consider taxes when deciding where to live? Should they?
2. How can state and local tax policy be used to attract new residents and stimulate growth?
3. Which states have particularly complicated tax rules for families?
4. How has the total amount families pay in state and local taxes changed as a result of the new tax code?
5. Which states have the best mix of taxes and government services?
6. Should people pay taxes based on where they live or where they work?

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• Michael J. Wasylenko Ph.D. – Maxwell Advisory Board Professor of Economics, Department of Economics, Senior Research Associate, Center for Policy Research, Maxwell School, Syracuse University
• James Edwin Kee Professor Emeritus of Public Policy and Public Administration, George Washington University
• Christine Martell Ph.D. – Associate Professor, School of Public Affairs, University of Colorado Denver
• Richard Pomp Alva P. Loiselle Professor of Law, University of Connecticut

 

Methodology

In order to identify the states with the highest and lowest tax rates, WalletHub compared the 50 states and the District of Columbia across four types of taxation:

1. Real-Estate Tax: We first divided the “Median Real-Estate Tax Amount Paid” by the “Median Home Price” in each state. We then applied the resulting rates to a house worth $184,700, the median value for a home in the U.S., in order to obtain the dollar amount paid as real-estate tax per household.
2. Vehicle Property Tax: We examined data for cities and counties collectively accounting for at least 50 percent of the state’s population and extrapolated this to the state level using weighted averages based on population size. For each state, we assumed all residents own the same car: a Toyota Camry LE four-door sedan, 2017’s highest-selling car, valued at $24,000, as of March 2018.
3. Income Tax: We used the percentage of income (middle income rate) spent on income tax from WalletHub’s Best States to Be Rich or Poor from a Tax Perspective report. “Income” refers to the mean third quintile U.S. income amount of $55,754.
4. Sales & Excise Tax: We used the percentage of income (middle income rate) spent on sales and excise taxes from WalletHub’s Best States to Be Rich or Poor from a Tax Perspective report. “Income” refers to the mean third quintile U.S. income amount of $55,754.

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Sources: Data used to create this ranking were collected from the U.S. Census Bureau, Tax Foundation, Federation of Tax Administrators, American Petroleum Institute, National Automobile Dealers Association, each state’s Department of Motor Vehicles and WalletHub research.

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