Do You Live in a High Tax State?

More money, more (tax) problems. Or at the very least, the more money you make, the higher your tax burden will be come Tax Day. Right? Well, depending on whether you live in a high tax state.

As we all know, even that statement takes some qualifying. Even if Joe Schmo of California makes $100,000 a year and Jane Schmo (Joe’s distant cousin) of California makes the same amount, their tax burdens will vary.

While they may owe the same total on their federal taxes, their states have wildly different income tax rates. One is a low-tax state. The other is a high tax state.

And this makes all the difference. In fact, depending on your income, you may end up with a difference of thousands of dollars each year. Seriously, thousands! Your decision to live in California over Alaska or to headquarter your business on one side of a state divide over another can have a huge impact on your finances over the course of your lifetime.

That alone might not make you eager to pack up and move to greener pastures. But when you pair that difference that with a mix of other factors—cost of living, job opportunities, property taxes, and more—you might be surprised to find yourself considering a move.

Do you live in a high tax state?

It may seem obvious, but this tax tip is commonly overlooked: How much you owe your state and local municipalities plays a much bigger role in what you pay each year in taxes—not what you owe the IRS. And high tax states do exist out there.

First, let’s go over some of the state and local taxes you should keep in mind when comparing tax obligations. Next, we’ll give you a complete rundown of the current (2019) state income tax tables, so you can see where your state falls.

Which State and Local Taxes Can You Compare?

Just about anything you can imagine comes with some sort of a tax. Did you make money this year? Tax. Did you buy a coffee at a restaurant? Tax. Did you own property? Tax.

While all these taxes certainly make a portion of taxpayers cringe, they’re the reality in the U.S.—and they can play a huge role in how much of your money you keep each year.

Here are the major tax types that vary from state to state—and even from city to city.

High Tax State: Income Taxes

This is probably the most prominent tax people discuss, so we won’t bore you with the details. However, your state income tax can play a huge role in how much you take home each year.

At a core level, income taxes function as a tax on any money you have accrued over time—whether that may be from labor or from investments. Other taxes, such as estate taxes, capital gains taxes, and gift taxes all fall under this umbrella. Not only are you taxed by the federal government, but also by your state government—and your obligation can vary wildly.

High Tax State: Property Taxes

Property taxes are another well-known tax type, and they essentially work by taxing you based on the value of your property.

These taxes usually vary based on your local government, and might go toward a local school district. But because they’re based on the value of your property, they can change if property values go up or down in your area. Houses and land aren’t the only things that might carry a property tax; automobiles, airplanes, and even boats may do the same.

High Tax State: Sales Taxes

Sales taxes are another type of state and local tax that can play a big impact on how much money you keep in your pocket.

These taxes are imposed on all sorts of things, from gas to car rentals. You will see a sales tax on that Big Mac you buy at McDonald’s, and you may also see some hefty taxes on your monthly cell phone bill. Other taxes, like sin taxes and luxury taxes, are imposed on things like cigarettes or expensive cars. (We’ll let you figure out which is applied to which.)

Income Taxes by State

Look, every single one of those taxes we listed above varies from state to state, and from one town to another. Some states are known for their high sales taxes, while others are known for having no income tax. Some states are tax-friendly to businesses, while certain cities have made recent headlines for imposing hefty taxes on large sizes of sodas.

We can’t get into the nitty-gritty on every single tax in every single state and city, because it would take so long that by the time we finished it would already be outdated!

With that said, here’s a list of state individual income tax collections per capita. We’ve sorted from high tax states to lowest (according to the experts at the Tax Foundation).

  1. New York – $2,345
  2. Massachusetts – $2,115
  3. Connecticut – $2,106
  4. California – $2,055
  5. Minnesota – $1,943
  6. Oregon – $1,882
  7. New Jersey – $1,488
  8. Hawaii – $1,481
  9. Virginia – $1,454
  10. Maryland – $1,414
  11. Wisconsin – $1,297
  12. North Carolina – $1,186
  13. Nebraska – $1,177
  14. Colorado – $1,173
  15. Vermont – $1,171
  16. Rhode Island – $1,169
  17. Delaware – $1,168
  18. Maine – $1,166
  19. Montana – $1,137
  20. Iowa – $1,135
  21. Utah – $1,108
  22. Illinois – $1,076
  23. Georgia – $1,012
  24. West Virginia – $1,009
  25. Missouri – $989
  26. Kentucky – $965
  27. Michigan – $937
  28. Pennsylvania – $933
  29. Arkansas – $931
  30. Idaho – $905
  31. Indiana – $787
  32. South Carolina – $780
  33. Kansas – $768
  34. Oklahoma – $764
  35. Alabama – $719
  36. Ohio – $703
  37. New Mexico – $676
  38. Louisiana – $612
  39. Mississippi – $603
  40. Arizona – $574
  41. North Dakota – $465
  42. New Hampshire – $66
  43. Tennessee – $49
  44. Alaska, Florida, Nevada, South Dakota, Texas, Washington, Wisconsin – $0

Consider Your Overall Tax Burden

What’s so interesting to us about looking at this list is that it hardly tells the whole story. Your local property taxes, your sales taxes, and even corporate taxes all play a big role in your overall tax burden. You might pay them at tax time or you’re paying them at the cash register.

Do we expect you to pick up and leave town because of any of these rates? Of course not! However, we do hope you’ve taken away some small nuggets that allow you to think about taxes beyond your federal tax return. After all, it may just help you save a little money down the road.

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