Study: Rhode Islanders are 5th Highest Taxed in the United States

Rhode Island taxpayers have the 5th highest tax burden in the United States, according to a new study published by WalletHub.

The study shows that Rhode Islander’s pay an increase of 25.77% over the National Average of State and Local Tax Rates.

“As you might expect, differences in state tax obligations — as well as the services for which tax dollars are allocated — can drive residents out of or draw them in to a state and thus impact the strength of local economies. Such trends are evident among professional athletes and retirees, for example, groups that often relocate to Florida or Texas for the income-tax breaks they offer,” the study said.

“As this year’s tax-filing deadline — April 18 in most states — looms closer, it’s fair to wonder which states have the most and least burdensome tax rates. WalletHub’s analysts searched for answers, comparing state and local tax rates in the 50 states and the District of Columbia against the national median. 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.”

Methodology

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

1. Real-Estate Tax: To calculate this 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 $175,700, the median value for a home in the U.S., in order to obtain the dollar amount paid as real-estate tax.
2. Vehicle Property Tax: To calculate this 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: the 2016 Toyota Camry LE four-door sedan, 2015’s highest-selling car, valued at $23,070.
3. Income Tax: To calculate this 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 Perspectivereport. More specifically, we used the mean third quintile income amount of $53,889.
4. Sales & Excise Tax: To calculate this 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. More specifically, we used the mean third quintile income amount of $53,889.

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