New York Tops List of States with Highest Tax Burden

April 22, 2016
DMD Staff

Income taxes may take the biggest chunk out of your paycheck, but plenty of other taxes lighten your wallet. A new study picked out the states with the highest overall tax burdens.

This week marked the deadline to pay file your state and federal income taxes, but income taxes are just one part of your overall tax equation. In fact, the total tax burden you face can vary greatly from state to state.

This will be no surprise: The Big Apple takes the biggest bite out of its residents’ income, according to research from consumer financial destination Wallet Hub identifies the US states with the highest and lowest overall tax burdens.

New York is No. 1 with a bullet in terms of overall tax burden—a figure that combines property tax requirements, income tax rates, and sales taxes. With the nation’s third-largest property tax percentage relative to personal income (4.7%), highest income tax burden (4.8%), and middle of the pack sales taxes (3.7%), Gotham’s overall tax burden of 13.1% lapped the competition. Hawaii, fueled by massive sales taxes (6.95%), came in a distant second, with an overall tax burden of 11.9%.

Rounding out the top five in terms of tax burden were Maine (11.1%), Vermont (11.1%), and Connecticut (10.91%). New Jersey, despite the dubious accomplishment of having the nation’s highest property taxes by a lot (5.4%), was 7th in overall tax burden. Minnesota, Rhode Island, Wisconsin, and Illinois are also in the top 10.

At the other end of the spectrum, residents of Alaska have the lowest tax burden, with no income tax, miniscule sales taxes, and property taxes of only 3.7%, for an overall tax burden (5.2%) that’s nearly 8% less than that experienced by New Yorkers. Other zero-income tax states, including Texas, Florida, South Dakota, and Wyoming all finished in the bottom 10, along with Alabama, Oklahoma, New Hampshire, Tennessee, and Delaware.

Tax burden, according to Wallet Hub, “measures the exact portion of the total personal income of residents in a state that are paid toward state and local taxes.” The research compared the three types of taxes that comprise state tax burden with the percentage of total personal income in the state to arrive at the percentage of tax burden.

Among the other interesting findings of the research, states that voted Republican in the last Presidential election had a lower overall tax burden than states that voted Democratic.

The factors that determine how much states collect are too many to list, but they include population and demographics, state industries and their profitability, geography, amount of tax revenue needed to provide public services, and other factors such as tolls collected. That last factor is one of the reasons toll-heavy Delaware—which collects significant revenue from out-of-staters passing through the First State—collects low property, income, and sales taxes, all of which fall under 3% in terms of tax burden to residents.

One thing to keep in mind: those looking to locate as a precursor to their retirement should note that tax burden is only one measure. When looking at potential relocation sites, you’ll consider many other factors, including climate, property values, proximity to family, population density, and many more.

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