Analysis: States with the largest (and smallest) tax burden
What is the landscape of taxes in America going into 2021? The Tax Cuts and Jobs Act, which was signed into law in 2017 by President Donald Trump, reduced personal income tax rates for most people across the nation. However, that same piece of tax legislation also put a cap on state and local tax (SALT) deductions. Formerly, taxpayers who itemize could deduct the total amount of state and local taxes paid from their federal tax return, which significantly reduced an individual’s federal tax burden. But the new tax code caps SALT deductions at $10,000 – a change that has made living in high-tax states even more expensive for high earners.
The three largest types of state and local taxes that impact residents in those states are sales, property, and individual income taxes. Based on data from the U.S Census Bureau’s most recent Annual Survey of State and Local Government Finances, Americans paid $1,869 in sales taxes, $1,301 in income taxes, and $1,672 in property taxes per capita in 2018. Combined, this equates to $4,842 per capita, or approximately 8.9% of per capita income. But, the total amount of taxes paid and the allocation of those taxes across sales, income, and property vary widely by state.
While most states rely heavily on these three sources of taxes, many of the lowest-tax states for residents generate tax revenue in ways that do not financially burden those residents in a direct way. For example, North Dakota had the highest tax revenue growth of any state in 2019; the state accomplished this through high severance taxes on the extraction of oil, natural gas, and other natural resources. When compared to other states, North Dakota shifts the tax burden from residents to oil and gas companies operating in the state. Similarly, Alaska collects no individual income tax and also boasts relatively low sales taxes. The state generates the bulk of its revenue (as high as 70% in some years) through the taxation of oil and natural gas production, while keeping taxes on individual residents low.
To identify the states with the largest and smallest tax burdens for residents, researchers at HireAHelper used data from the U.S. Census Bureau and U.S. Bureau of Economic Analysis to calculate the total annual property, income, and sales taxes collected in each state as a percentage of the state’s total annual personal income.
Across all 50 states and District of Columbia, the combined property, income, and sales taxes as a percentage of personal income ranges from a low of 5.04% annually in Alaska to a high of 12.80% in New York. States with the highest tax burdens tend to be located in the Northeastern region of the country, whereas states with the lowest tax burden are located in the South. Here are the states with the highest and lowest tax burdens for residents.
States with the largest tax burden for residents
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1. New York
Property, income, and sales taxes as a percentage of income: 12.80%Annual property, income, and sales taxes per person: $8,781Property taxes as a percentage of income: 4.41%Income taxes as a percentage of income: 4.96%Sales taxes as a percentage of income: 3.43%
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2. Hawaii
Property, income, and sales taxes as a percentage of income: 12.23%Annual property, income, and sales taxes per person: $6,755Property taxes as a percentage of income: 2.46%Income taxes as a percentage of income: 3.10%Sales taxes as a percentage of income: 6.68%
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3. District of Columbia
Property, income, and sales taxes as a percentage of income: 11.63%Annual property, income, and sales taxes per person: $9,435Property taxes as a percentage of income: 4.60%Income taxes as a percentage of income: 3.63%Sales taxes as a percentage of income: 3.40%
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4. Vermont
Property, income, and sales taxes as a percentage of income: 10.92%Annual property, income, and sales taxes per person: $5,827Property taxes as a percentage of income: 5.12%Income taxes as a percentage of income: 2.45%Sales taxes as a percentage of income: 3.35%
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5. Connecticut
Property, income, and sales taxes as a percentage of income: 10.67%Annual property, income, and sales taxes per person: $7,985Property taxes as a percentage of income: 4.15%Income taxes as a percentage of income: 3.64%Sales taxes as a percentage of income: 2.88%
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6. Maine
Property, income, and sales taxes as a percentage of income: 10.52%Annual property, income, and sales taxes per person: $5,136Property taxes as a percentage of income: 4.61%Income taxes as a percentage of income: 2.46%Sales taxes as a percentage of income: 3.45%
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7. New Jersey
Property, income, and sales taxes as a percentage of income: 10.06%Annual property, income, and sales taxes per person: $6,809Property taxes as a percentage of income: 4.98%Income taxes as a percentage of income: 2.49%Sales taxes as a percentage of income: 2.59%
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8. Minnesota
Property, income, and sales taxes as a percentage of income: 10.02%Annual property, income, and sales taxes per person: $5,746Property taxes as a percentage of income: 2.87%Income taxes as a percentage of income: 3.69%Sales taxes as a percentage of income: 3.46%
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9. Rhode Island
Property, income, and sales taxes as a percentage of income: 9.75%Annual property, income, and sales taxes per person: $5,312Property taxes as a percentage of income: 4.47%Income taxes as a percentage of income: 2.31%Sales taxes as a percentage of income: 2.98%
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10. California
Property, income, and sales taxes as a percentage of income: 9.49%Annual property, income, and sales taxes per person: $6,029Property taxes as a percentage of income: 2.64%Income taxes as a percentage of income: 3.78%Sales taxes as a percentage of income: 3.06%
States with the smallest tax burden for residents
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1. Alaska
Property, income, and sales taxes as a percentage of income: 5.04%Annual property, income, and sales taxes per person: $3,030Property taxes as a percentage of income: 3.64%Income taxes as a percentage of income: 0.00%Sales taxes as a percentage of income: 1.40%
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2. Tennessee
Property, income, and sales taxes as a percentage of income: 5.70%Annual property, income, and sales taxes per person: $2,694Property taxes as a percentage of income: 1.69%Income taxes as a percentage of income: 0.08%Sales taxes as a percentage of income: 3.93%
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3. Wyoming
Property, income, and sales taxes as a percentage of income: 6.11%Annual property, income, and sales taxes per person: $3,709Property taxes as a percentage of income: 3.32%Income taxes as a percentage of income: 0.00%Sales taxes as a percentage of income: 2.80%
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4. Delaware
Property, income, and sales taxes as a percentage of income: 6.17%Annual property, income, and sales taxes per person: $3,260Property taxes as a percentage of income: 1.76%Income taxes as a percentage of income: 3.23%Sales taxes as a percentage of income: 1.18%
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5. New Hampshire
Property, income, and sales taxes as a percentage of income: 6.83%Annual property, income, and sales taxes per person: $4,192Property taxes as a percentage of income: 5.47%Income taxes as a percentage of income: 0.13%Sales taxes as a percentage of income: 1.24%
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6. Florida
Property, income, and sales taxes as a percentage of income: 6.86%Annual property, income, and sales taxes per person: $3,489Property taxes as a percentage of income: 2.70%Income taxes as a percentage of income: 0.00%Sales taxes as a percentage of income: 4.16%
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7. Oklahoma
Property, income, and sales taxes as a percentage of income: 7.19%Annual property, income, and sales taxes per person: $3,295Property taxes as a percentage of income: 1.68%Income taxes as a percentage of income: 1.93%Sales taxes as a percentage of income: 3.58%
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8. South Dakota
Property, income, and sales taxes as a percentage of income: 7.35%Annual property, income, and sales taxes per person: $3,853Property taxes as a percentage of income: 3.01%Income taxes as a percentage of income: 0.00%Sales taxes as a percentage of income: 4.34%
Photo Credit: Alamy Stock Photo
9. Montana
Property, income, and sales taxes as a percentage of income: 7.36%Annual property, income, and sales taxes per person: $3,540Property taxes as a percentage of income: 3.55%Income taxes as a percentage of income: 2.54%Sales taxes as a percentage of income: 1.26%
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10. Alabama
Property, income, and sales taxes as a percentage of income: 7.37%Annual property, income, and sales taxes per person: $3,147Property taxes as a percentage of income: 1.40%Income taxes as a percentage of income: 1.94%Sales taxes as a percentage of income: 4.03%
Methodology & detailed findings
State and local tax collections by state are from the most recent Annual Survey of State and Local Government Finances (2018), published by the U.S. Census Bureau. Income data is from the U.S. Bureau of Economic Analysis Personal Income by State.
To identify the states with the largest and smallest tax burdens for residents, researchers calculated the total annual property, income, and sales taxes collected in each state and divided that number by the state’s total annual personal income. Researchers also calculated the total annual property, income, and sales taxes collected per person.
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