2016’s States With The Highest & Lowest Tax Rates by John S Kiernan, WalletHub
Tax season can be stressful for many Americans, especially those who still owe money to Uncle Sam at the end of it. Every year, the average U.S. household pays more than $5,700 in federal income taxes, according to the Bureau of Labor Statistics. And while we’re all faced with that same obligation, there is significant disparity when it comes to state and local taxes. Taxpayers in the most expensive states, for instance, pay three times more than those in the cheapest states to meet their civic burden.
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.
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. This approach contrasts with our methodology for the Best States to Be Rich & Poor from a Tax Perspective, which considers tax obligations relative to the average income in each state.
Scroll down for the complete ranking, commentary on state- and local-tax insights from a panel of leading minds in the field, as well as a full description of our methodology.
States With The Highest & Lowest Tax Rates
It’s no secret that tax bills aren’t created equal. But while most of us understand that some states don’t charge income or sales taxes, we might not realize how state-by-state tax differences result in paying considerably more or less than our neighbors in other states. To answer that question, WalletHub today released its report on 2016’s States with the Highest & Lowest Tax Rates.
| Overall Rank | State | Effective Total State & Local Tax Rates on Median U.S. Household* | Annual State & Local Taxes on Median U.S. Household* | % Difference Between State & Nat’l. Avg.** | Annual State & Local Taxes on Median State Household*** | Adjusted Overall Rank (based on Cost of Living Index) |
| 1 | Alaska | 5.69% | $3,066 | -46.85% | $4,237 | 6 |
| 2 | Delaware | 6.02% | $3,246 | -43.74% | $3,830 | 1 |
| 3 | Montana | 6.92% | $3,728 | -35.37% | $3,561 | 3 |
| 4 | Wyoming | 7.45% | $4,015 | -30.40% | $4,312 | 2 |
| 5 | Nevada | 7.72% | $4,161 | -27.86% | $4,028 | 7 |
| 6 | Tennessee | 7.95% | $4,284 | -25.75% | $3,523 | 4 |
| 7 | Idaho | 8.48% | $4,569 | -20.80% | $4,074 | 5 |
| 8 | California | 8.80% | $4,741 | -17.81% | $6,803 | 33 |
| 9 | South Carolina | 8.80% | $4,742 | -17.80% | $4,009 | 9 |
| 10 | Florida | 9.03% | $4,868 | -15.62% | $4,305 | 11 |
| 11 | Oregon | 9.17% | $4,943 | -14.32% | $5,392 | 34 |
| 12 | Colorado | 9.41% | $5,070 | -12.11% | $5,854 | 15 |
| 13 | Alabama | 9.43% | $5,080 | -11.94% | $4,081 | 8 |
| 14 | Utah | 9.53% | $5,133 | -11.02% | $5,802 | 10 |
| 34 | Washington | 11.69% | $6,302 | 9.25% | $7,722 | 37 |
| 35 | Maryland | 11.85% | $6,387 | 10.71% | $9,320 | 44 |
| 36 | Indiana | 11.86% | $6,390 | 10.77% | $5,506 | 24 |
| 37 | Kentucky | 11.97% | $6,449 | 11.78% | $5,104 | 27 |
| 38 | Mississippi | 12.11% | $6,525 | 13.11% | $4,782 | 18 |
| 39 | Pennsylvania | 12.22% | $6,583 | 14.12% | $6,388 | 38 |
| 40 | Arkansas | 12.25% | $6,603 | 14.46% | $4,975 | 29 |
| 41 | Kansas | 12.29% | $6,625 | 14.84% | $5,853 | 28 |
| 42 | New Jersey | 12.39% | $6,675 | 15.70% | $10,891 | 47 |
| 43 | Iowa | 12.75% | $6,872 | 19.12% | $6,071 | 31 |
| 44 | Ohio | 12.97% | $6,991 | 21.19% | $5,892 | 36 |
| 45 | Michigan | 13.09% | $7,054 | 22.28% | $5,717 | 35 |
| 46 | New York | 13.38% | $7,211 | 25.00% | $9,342 | 51 |
| 47 | Rhode Island | 13.46% | $7,255 | 25.77% | $8,497 | 48 |
| 48 | Connecticut | 13.48% | $7,262 | 25.89% | $10,131 | 50 |
| 49 | Wisconsin | 13.58% | $7,316 | 26.82% | $7,065 | 41 |
| 50 | Nebraska | 13.85% | $7,466 | 29.41% | $6,525 | 39 |
| 51 | Illinois | 14.54% | $7,836 | 35.83% | $8,100 | 43 |
With tax season in full gear, WalletHub’s analysts compared various tax rates among the 50 states and the District of Columbia in terms of the national average consumer’s income and spending habits.
Comparing the States with the Highest & Lowest Tax Rates
- Tax rates in the most expensive states are three times higher than those in the least expensive states.
- New York has the highest cigarette excise-tax, $4.35, which is 26 times higher than in Missouri, the state with the lowest, $0.17.
- Tax rates are 10.56 percent higher in Blue States, $6,040, than in Red States, $5,463.
- Washington has the highest sales and excise tax rate, 8.16 percent, which is nine times higher than in Oregon, the state with the lowest, 0.93 percent.
- Pennsylvania has the highest gas tax, $0.5040 per gallon, which is two times higher than in Alaska, the state with the lowest, $0.1225 per gallon.
