The gap between high-tax and low-tax states has unfortunately never been wider. While residents in states such as Alaska and Tennessee pay well under $5,000 per person in combined state and local taxes, those in more costly states can pay as much as two or three times as much. For anyone trying to make decisions about where to live, work, and ultimately, retire, this difference compounds into real money over time.
According to the latest information and Census Bureau data, the national average for per-capita state and local tax collections stands at $7,109. The good news is that most states happen to cluster somewhere around this figure, balancing revenue with the competitive pressure to keep taxes reasonable.
However, at least 10 states have crossed the $8,000 threshold, collecting at least 13% more than average from every person within their borders. This includes the total tax collected across various categories, such as income, property, sales, and excise taxes. The reality is that these per-capita figures cut right through the marketing fluff to show what state governments are actually taking from residents.
What Drives These High Collections
States end up in the $8,000 plus club for a variety of different reasons, including but not limited to high income taxes, while others have crushing property taxes that burden homeowners year after year, regardless of income. A few use broad consumption taxes that touch nearly every transaction, and other states, like North Dakota, appear on the list due to severance taxes on natural resources that are largely exported to out-of-state consumers.
Understanding why a state collects so heavily matters as much as knowing it does. A retiree on a fixed income in Illinois will experience the state’s heavy property taxes differently from someone who has to navigate California’s income-tax-heavy approach.
Another consideration is that someone building wealth through investments faces one set of challenges if they live in Washington, where they have to work on capital gains and high estate taxes, when compared to New York residents, who have higher income taxes but don’t have a special capital gains rate. If you happen to live in any of 10 10 states listed below, like New York and California, you’re experiencing a tax burden of more than $8,000 per person.
10. Minnesota
With an $8,050 tax burden, Minnesota’s high collection is heavily focused on its aggressive income taxation. The state applies progressive rates from 5.35% to 9.85% on all income, including retirement distributions, without any special exemptions. Minnesota also taxes Social Security benefits for higher earners. The state does offer property tax relief programs, but for anyone with a substantial income, it’s still one of the most expensive places to keep what you make.
9. Illinois
Illinois is something of a unique paradox in that it exempts all retirement income from taxation, but still somehow breaks into the top 10. The culprit, it turns out, is property taxes, in which Illinois ranks as the second-highest in the nation, with an average tax rate exceeding 2%. This means that a $350,000 home might face $7,000 more in annual property taxes. Add in a sales tax that can exceed 8.89% in many places, and it just adds to your overall tax burden at $8,148 per capita. Illinois is all the proof you need that income tax exemptions don’t guarantee a lower overall tax bill.
8. Vermont
Stuck with an $8,158 per capita tax burden, Vermont residents are feeling the pinch on their wallets with the nation’s highest property taxes as a percentage of income. This single category helps it earn the #8 place on this list, as does income tax, which can reach 8.75% for higher earnings. Worse yet, Vermont is still one of eight states that taxes Social Security benefits and imposes an estate tax starting at $ million. For property owners living in Vermont, there is a steep price.
7. North Dakota
The presence of North Dakota and its $8,961 per capita tax burden on this list feels plenty misleading. With this figure reflecting severance taxes on oil and gas extraction, revenue that is largely paid by energy companies and exported out of state. The thing is, for North Dakota residents, the state eliminated income taxes for most filers, charges no estate tax, and enjoys moderate property taxes, so the resident experience may not necessarily reflect the per-capita experience.
6. Massachusetts
Massachusetts residents have to navigate one of the lowest estate tax thresholds in the country.
Massachusetts recently added 4% surtax on income over $1 million, pushing its top rate to 9%, contributing to its $9,341 per capita tax burden. The state also fully taxes retirement distributions at 5% and 9% if you’re a millionaire, all while exempting Social Security. Property taxes also rank among the nation’s highest, and the estate tax kicks in at just $2 million, one of the lowest thresholds in the country. In other words, Massachusetts residents are getting hit from all sides.
5. New Jersey
New Jersey’s claim to infamy is its property taxes, which contribute to the $9,366 per capita number and are among the highest in the nation, with annual bills of around $9,500. The state does exempt Social Security and offers retirement exclusions up to $100,000 for those earning under $150,000. For income taxes, you might find yourself being taxed as high as 10.75% if you are a high earner, and an inheritance tax applies to certain beneficiaries. The bottom line is that for residents of New Jersey, the property tax bill alone can exceed the total tax bills of other states.
4. Hawaii
At $9,503 per capita, Hawaii’s general excise tax, which is like a ridiculous sales tax, residents of the state are definitely paying more than most. The excise state tentacles out across and ends up hitting transactions multiple times, all while income tax in the state reaches 11%, the second highest in the country. On the plus side, Hawaii does exempt Social Security but offers only limited relief for other retirement income. Combined with the nation’s highest cost of living, Hawaii’s tax burden makes living in the state difficult for many residents, and this is before you factor in how long it can take to receive something from the mainland.
3. Connecticut
Connecticut taxes income at rates up to 6.99% while maintaining some of the nation’s highest property taxes, which contribute to its $9,718 per capita tax burden. Recent reforms have exempted Social Security for those with an Adjusted Gross Income below $75,000 as a single filer and $100,000 join. Similarly, IRA distributions are now also exempt. However, the state remains the only one with a gift tax, which makes intergenerational wealth transfer increasingly challenging and expensive. On a positive note, the estate tax does match federal tax exemptions, so there is some relief here for wealthier residents.
2. California
With a top income tax rate of 13.3%, plus a 1% surtax on every dollar over $1 million, California’s $10,319 per capita tax burden is challenging to say the least for residents. The state does exempt Social Security, but fully taxes all other income, including pensions and retirement distributions, at ordinary rates without any kind of special treatment. Property taxes are limited under Proposition 13 for long-term owners, but for new residents moving homes or entering the state, the tax burden can be substantial.
1. New York
New York City residents feel like they get hit from every possible tax angle.
At $12,685 per capita of a tax burden, New York residents pay more than 80% the national average, and it isn’t even close. Income taxes reach 10.9% on the highest earners, and property taxes are also among the nation’s highest. The estate tax includes a notorious “cliff” that eliminates the $7.16 million exemption if your estate exceeds 105% of this threshold. New York does exempt Social Security and offers a $20,000 retirement income exclusion, but it’s not enough to prevent New York from remaining the most expensive tax jurisdiction in the country.
For residents weighing whether to stay or relocate in any of these states, it’s hard to make sense of the math in many cases. A retiree with a paid-off home in Illinois faces different calculations than someone renting in California.
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