As tax season approaches, many Americans grapple with understanding how their earnings will be affected by the complexities of the tax code. Amidst this confusion, a simple metric known as the “tax burden” offers clarity by measuring the proportion of total personal income that residents contribute toward state and local taxes.
Unlike tax rates, which fluctuate depending on individual circumstances, the tax burden provides a uniform measure of taxation across different states. WalletHub, a personal finance website, recently conducted a study to determine which states impose the heaviest tax burdens on their residents and they have found that Rhode Island has the 10th highest tax burden in the country.
The study assessed the cost of three primary types of taxes—property taxes, individual income taxes, and sales and excise taxes—as a share of total personal income in each state. By comparing these factors across all 50 states, WalletHub aimed to identify regions where residents bear the greatest tax burdens.
The findings underscored significant variations in tax burdens across the United States. Some states impose higher tax burdens on their residents compared to others, reflecting differences in taxation policies and structures. This disparity highlights the importance of understanding how state and local taxes impact individuals’ financial well-being.
Key Findings
- Rhode Island has the 10th highest tax burden in the country.
- New York has the highest overall tax burden, while Alaska has the lowest.
- Maine has the highest property tax burden, while Alabama has the lowest.
- California has the highest individual income tax burden, while seven states (including Texas, Florida and Washington) have the lowest.
- Washington has the highest sales and excise tax burden, while New Hampshire has the lowest.
- Red states have a lower tax burden than blue states, on average.
In-Depth Look at State Tax Burdens
Total Tax Burden
New York has the highest total tax burden, with residents paying out around 12% of their income to state and local governments. That includes 4.6% on income taxes, 4.4% on property taxes, and 3% in sales and excise taxes.
Alaska has the lowest total tax burden, as its residents pay no income tax. They also pay out only 3.5% of their income in property taxes and 1.4% in sales and excise taxes, for a total of 4.9%.
Income Tax Burden
California has the costliest state and local income taxes in the nation, at 4.9% of its residents’ income. On the other end of the spectrum, Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming do not charge any income tax. This makes them attractive states to move to.
Property Tax Burden
Maine charges the most in property taxes, at nearly 4.9% of residents’ income. All states have some sort of property tax, but Alabama’s is by far the lowest, at just 1.3%.
Sales and Excise Tax Burden
Residents of Washington pay out around 5.5% of their income in sales and excise taxes every year. New Hampshire residents have the lowest burden – the state does not charge a general sales tax, and other excise taxes only work out to less than 1% of the average resident’s income each year.
Methodology
In order to determine the states that tax their residents the most and least aggressively, WalletHub 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 as of March 12, 2024 from the Tax Policy Center.
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