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Tax Burden By State

Tax Burden By State
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Taxation in the United States

In the United States, taxation is an intricate thread woven into the fabric of our societal structure. However, the complexity of the U.S. tax system, with both federal tax obligations and unique state-based taxes, can often lead to confusion. This is intensified by the variations in the rules, reliefs, and types of taxes present on a state-by-state basis. Taxes, albeit viewed as a burden, serve a pivotal role in states' revenue generation, facilitating critical infrastructure development, supporting state programs, and serving other vital roles.

We dive into the realm of state and local taxes,  to understand the overall "tax burden" shouldered by inhabitants of different states. The tax burden ratio is a comprehensive indicator that takes into account property taxes, income taxes, and sales and excise taxes to reveal a percentage of total income that residents pay in state and local taxes.

Key findings derived from the data include:

  • When delving into taxation across the states, New York emerges with the heaviest tax burden. It tops the list with a state-local tax burden of 15.9%, followed closely by Connecticut at 15.4%.
  • On the other end of the spectrum, Alaska stands out with the lowest tax burden, only 4.6%— a figure substantially less than the states with the highest burdens.
  • Distinct regional variances are prevalent. For example, states in the northeast, such as New York, Connecticut, Vermont, and New Jersey, tend to have higher tax burdens ranging between 13% and 16%, while southern regions, including Texas, Tennessee, and Louisiana, experience substantially lower tax burdens, typically below 10%.
  • Many of the states with lower tax burdens, including Texas and Florida, levied no state income tax, shifting their revenue generation to other forms of taxation such as property and sales taxes.
  • The variation in tax burdens highlights the wide-ranging approaches, laws, and principles each state utilizes to fund its necessary operations. The range from the highest to the lowest tax burden spans more than 10 percentage points.

Highest Taxed States

New York reigns supreme among the highly taxed states with a state-local tax burden of 15.90%, holding a clear lead over the others. Due to a combination of property taxes, income taxes, and sales and excise taxes, residents see a significant portion of their income allocated towards state and local taxes. With expansive infrastructure and numerous state-wide programs, this hefty tax burden supports a wide array of critical functions and civic responsibilities.

A close runner-up is Connecticut, where the state-local tax burden is 15.40%. This high taxation helps fund a robust socio-economic landscape that includes a blend of urban centers, suburbs, and rural areas.

Hawaii, being third in line with a 14.10% tax burden, utilizes these funds particularly towards its specialized infrastructure requirements, endemic to its unique geographical positioning. 

Next on the list are Vermont and California, with tax burdens of 13.60% and 13.50%, respectively. 

The remaining five on this list of the top ten states with high tax burdens are New Jersey (13.20%), Illinois (12.90%), Virginia (12.50%), Delaware (12.40%), and Maine (12.40%).

Highest Taxed States:

  1. New York - 15.90%
  2. Connecticut - 15.40%
  3. Hawaii - 14.10%
  4. Vermont - 13.60%
  5. California - 13.50%
  6. New Jersey - 13.20%
  7. Illinois - 12.90%
  8. Virginia - 12.50%
  9. Delaware - 12.40%
  10. Maine - 12.40%

Lowest Taxed States

The state recording the least tax burden is Alaska, which posts a low state-local tax burden of 4.6%. This attractive tax burden is largely due to the absence of state sales and income taxes, with the government relying heavily on oil revenues to fund its operations.

Coming second on the list is Wyoming, with a tax burden of 7.5%. Like Alaska, Wyoming doesn't levy an individual or corporate income tax, relying on revenue from its robust mineral extraction industry to make up the shortfall. Tennessee wraps up the top three with a relatively low burden of 7.6%. The state's low burden is partly due to its choice not to implement a levy on wages and salaries.

Continuing down the list, South Dakota and Texas both return an equal tax burden of 8.6%. South Dakota generates a decent portion of its income from a state sales tax, while Texas, in the absence of a state income tax, draws a significant share of its revenue from property and sales tax. 

Michigan, North Dakota, South Carolina, Georgia, and Oklahoma also enjoy relatively low tax burdens, ranging from 8.6% to 9%. These states' lower burdens are mostly due to lower state and local income tax rates and lower property tax rates, particularly in South Carolina and Georgia.

Lowest Taxed States:

  1. Alaska - 4.60%
  2. Wyoming - 7.50%
  3. Tennessee - 7.60%
  4. South Dakota - 8.40%
  5. Texas - 8.60%
  6. Michigan - 8.60%
  7. North Dakota - 8.80%
  8. South Carolina - 8.90%
  9. Georgia - 8.90%
  10. Oklahoma - 9.00%

By State

Full Data Set

Frequently Asked Questions

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