States with the Highest (and Lowest) Taxes

During the 2010 tax season, Americans paid 9.9% of their income on state and local taxes. This number, according to a report released today by The Tax Foundation, is up from 9.3% in 2000, but is basically unchanged from 2009. Per capita income in the U.S. fell from $42,539 in 2009 to $41,146 in 2010, while taxes fell slightly, from $4,160 in 2009 to $4,112 in 2010.

Read: States with the Highest Taxes

Read: States with the Lowest Taxes

In some U.S. states, the burden on residents relative to their income rose substantially. In New York state, taxes paid per capita rose by more than $200, while income per capita fell by more than $1,100. According to the report, residents in New York paid 12.8% of their income on state and local taxes last year. In Alaska, residents paid just 7% of their income on non-federal taxes. Based on the Tax Foundation’s State and Local Tax Burden Rankings for 2010, 24/7 Wall St. identified the states with the largest and smallest tax burden on their residents.

The most important factor in how much a state demands of its residents is its ability to bring in income from out-of-state. In 2010, 73.8% of tax revenue to state and local governments came from state residents. In some states, however, much more of total tax revenue came from non-residents. In three — Alaska, North Dakota and Wyoming — more than half of tax revenue came from out of state. In Alaska, which benefits from taxes on energy companies operating in the state, residents are responsible for just 24.5% of all tax income.

All 10 of the the states with the lowest tax burdens received at least 32% of tax revenue from people who didn’t live in the state. In six states, it was more than 43%. Included on this list are those with large oil infrastructure, like Wyoming, Louisiana, Texas and Alaska. Nevada is heavily reliant on tourism, rather than oil, and 44% of its tax revenue comes from out of state.

In an interview with 24/7 Wall St., Tax Foundation economist Scott Drenkard explained that many states also have lower tax burdens because they have smaller government. “They don’t collect that much in taxes” Drenkard said, “so they don’t have that much of a burden.” This includes states like New Hampshire and Texas, which collect substantially less than the national average per capita. Among the 10 states with the lowest tax burdens, five are in the bottom 10 for total tax collections relative to population size.

“On the flip side,” explained Drenkard, “those states in the top 10 are states where they’re not really capable of exporting their tax burden — they don’t have mineral resources, but they’re also high-tax states in general.” Of the 10 states with the highest tax burdens, seven were among the largest tax collectors relative to population size.

While sales and excise taxes and corporate taxes have the potential to export a portion of a state’s tax burden to non-residents, property tax and income tax are more likely to largely fall on people living in the state. Six of the 10 states with the highest tax burdens are in the top 10 for property tax rates. Eight of the 10 states with the largest tax burdens are in the top 15 for income tax collections per capita. This includes New York, which has the highest tax burden on residents, as well as the highest income taxes per capita collected for the fiscal year 2010.

Based on the Tax Foundation’s annual State and Local Tax Burden report, 24/7 Wall St. identified the ten states where residents paid the most in state and local taxes relative to per capita income. We also reviewed per capita income and property, income, excise and sales taxes, which were all for the 2010 fiscal year, with the exception of excise tax rates, which are as of July 1, 2012, and property tax collections, which were for fiscal year 2009. 24/7 Wall St. also reviewed cost-of-living data from the Missouri Economic Research and Information Institute for the second quarter of 2012.

The Ten States with the Highest Tax Burden

10. Pennsylvania
> Taxes paid by residents as pct. of income: 10.2%
> Total state and local taxes collected: $52.71 billion (6th highest)
> Pct. of total taxes paid by residents: 76.8% (10th highest)
> Pct. of total taxes paid by non-residents: 23.2% (10th lowest)

Pennsylvania collected more than $52 billion in state and local taxes in the 2010 fiscal year. Of this amount, 76.8% came from residents. Pennsylvania residents earned an average of $40,861 per capita in 2010, slightly below the $41,146 in the U.S. In 2010, residents paid 10.2% of their income to Pennsylvania and other states. Total tax payments to Pennsylvania from in-state came to $3,118 per capita. Pennsylvania’s sales tax of 6% is tied for 16th highest in the country. The state’s income taxes are low, at a flat 3.07% across all income brackets. However, local taxes can come to an additional 1% or more, with residents in cities like Philadelphia paying more than 1.5%.

9. Maine
> Taxes paid by residents as pct. of income: 10.3%
> Total state and local taxes collected: $5.84 billion(10th lowest)
> Pct. of total taxes paid by residents: 63.6% (14th lowest)
> Pct. of total taxes paid by non-residents: 36.4% (14th highest)

Maine’s residents had a state and local tax burden of 10.3% in 2010, up from 10.1% in 2009. The tax burden may continue to get worse for some residents. The Maine Center for Economic Policy believes that lower-income residents will soon see higher property tax bills, since the legislature cut payments to municipalities at the same time as it cut income, pension and estate taxes. The Center argues this will primarily benefit the wealthy. In the fiscal year 2010, Maine collected $1,655 per capita in property taxes, which comes to 4.53% of the average resident’s income. This is the sixth-highest rate in the country.

Also Read: States with the Most Student Debt

8. Massachusetts
> Taxes paid by residents as pct. of income: 10.4%
> Total state and local taxes collected: $33.48 billion (10th highest)
> Pct. of total taxes paid by residents: 76.5% (12th highest)
> Pct. of total taxes paid by non-residents: 23.5% (12th lowest)

The 10.4% tax burden on Massachusetts residents was up from 10% in 2009. Income per capita fell from $53,029 in 2009 to $51,991 in 2010. Individual income taxes are a major part of the State’s tax burden. Massachusetts collected $1,549 per capita in income taxes from the 2010 tax season, the third-highest amount in the country. Massachusetts’ per capita income was the third highest, behind Connecticut and New Jersey, and the total tax bill per capita of $5,422 was the fourth–highest. Property taxes collected of $1,845 per capita, were the eighth highest of all states.

7. Minnesota
> Taxes paid by residents as pct. of income: 10.8%
> Total state and local taxes collected: $24.36 billion (17th highest)
> Pct. of total taxes paid by residents: 76.7% (11th highest)
> Pct. of total taxes paid by non-residents: 23.3% (11th lowest)

Minnesota residents’ state and local tax burden was 10.8% of income in 2010, up from 10.3% the previous year and 10.0% back in 2005. The state received $4,727 in taxes from both residents and non-residents in 2010, the seventh-highest rate in the U.S. This was up from $4,651 in 2009. The state ranked in the top 10 in both high sales taxes and high individual income taxes. There were three different tax brackets, with the highest bracket of 7.85% on individual income over $77,730 ($137,430 for couples). This was higher than most top tax brackets in the country.

6. Rhode Island
> Taxes paid by residents as pct. of income: 10.9%
> Total state and local taxes collected: $4.81 billion (8th lowest)
> Pct. of total taxes paid by residents: 71.0% (24th highest)
> Pct. of total taxes paid by non-residents: 29.0% (24th lowest)

Rhode Island’s state and local tax burden was close to 11% in the 2010 tax season, as residents paid $4,627 per capita in taxes. More than $1,300 of this was paid by residents to other states where Rhode Islanders bought goods and conducted business–a higher per capita total than most states. Rhode Island’s top personal income tax bracket was 5.99% of income for those earning over $129,900. The state sales tax in Rhode Island was 7%, the second highest in the country, and its cigarette tax of $3.50 a pack was more than all but one other state.
5. Wisconsin
> Taxes paid by residents as pct. of income: 11.1%
> Total state and local taxes collected: $24.39 billion (16th highest)
> Pct. of total taxes paid by residents: 77.7% (8th highest)
> Pct. of total taxes paid by non-residents: 22.3% (8th lowest)

Wisconsin’s heavy tax burden on residents comes from the state’s tax structure. The Milwaukee Journal Sentinel noted in 2010 that the Wisconsin relies heavily on property and income taxes since it doesn’t collect as much in user fees such as tolls and garbage collection rates. Because property taxes were the same rate across the state a larger share of the tax burden was placed on middle-income homeowners compared to states where the wealthy have higher tax burdens. Meanwhile, Wisconsin’s cigarette and gas excise taxes were both among the 10 highest in the U.S.

4.California
> Taxes paid by residents as pct. of income: 11.2%
> Total state and local taxes collected: $172.63 billion (the highest)
> Pct. of total taxes paid by residents: 84.5% (the highest)
> Pct. of total taxes paid by non-residents: 15.5% (the lowest)

In 2010, the state collected individual income taxes amounting to $1,229 a person, the fifth-highest in the country. There were seven different tax brackets in California, with income over $1 million for both individuals and couples taxed at 10.3%, higher than all top tax rates with the exception of Hawaii’s. Currently, the state levies a 7.25% general sales or use tax — the highest in the country. Those who refuel in California had to pay 36 cents per gallon in excise taxes and fees — the third-highest amount in the country.

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3. Connecticut
> Taxes paid by residents as pct. of income: 12.3%
> Total state and local taxes collected: $21.41 billion (19th highest)
> Pct. of total taxes paid by residents: 80.7% (4th highest)
> Pct. of total taxes paid by non-residents: 19.3% (4th lowest)

The 12.3% of resident income paid in taxes was up from 12% in 2009, although Connecticut was ranked the third highest in both years. Connecticut residents paid just under $7,000 per person in 2010, the highest amount in the country. However, in 2011 the legislature enacted a higher sales tax, cigarette tax and corporate income surcharge, and instituted a luxury goods tax. Although the effects aren’t yet clear, the changes are expected to bring in an additional $2.5 billion in a two-year time span. The cost of living in Connecticut was higher than in all but five states and property taxes were the second- highest in the country per person.

2. New Jersey
> Taxes paid by residents as pct. of income: 12.4%
> Total state and local taxes collected: $51.10 billion (7th highest)
> Pct. of total taxes paid by residents: 81.4% (3rd highest)
> Pct. of total taxes paid by non-residents: 18.6% (3rd lowest)

Since The Tax Foundation started ranking tax burdens in 1977, New Jersey has always been ranked in the top five states with the heaviest tax burdens. Property tax collections per capita of $2,671 were the highest in the nation. The percentage of New Jersey’s total taxes paid by residents of 81.4% was much higher than that of neighboring New York, at 73.3%. Only Connecticut residents paid more to other states on things like sales and excise taxes than the $1,836 New Jersey residents paid. In 2010, the state collected $1,176 per capita in personal income tax, the seventh most in the country.

1. New York
> Taxes paid by residents as pct. of income: 12.8%
> Total state and local taxes collected: $136.24 billion (2nd highest)
> Pct. of total taxes paid by residents: 73.3% (19th highest)
> Pct. of total taxes paid by non-residents: 26.7% (19th lowest)

New York’s tax rate of 12.8% of income was up from 12.1% in 2009, when it was second to New Jersey. Currently, the state has eight different tax levels, ranging from 4% for taxable income under $8,000 all the way up to 8.82% for income over $1 million. In addition to federal and state taxes, residents of New York City were required to pay a local income tax, commonly referred to as the city tax. Property taxes were very high in New York, too. The median property tax in Westchester County in 2008 was $8,404 annually, more than any other county in the U.S. New York also had the highest cigarette tax in the country at $4.35.

Also Read: States with the Lowest Taxes
The Ten States with the Lowest Tax Burden

10. South Carolina
> Taxes paid by residents as pct. of income: 8.4%
> Total state and local taxes collected: $13.16 billion (24th lowest)
> Pct. of total taxes paid by residents: 66.7% (19th lowest)
> Pct. of total taxes paid by non-residents: 33.3% (19th highest)

South Carolina’s state and local tax burden, at 8.4% of income, was 1.5 percentage points lower than the national rate. For the fiscal year 2010, South Carolina collected just $1,909 per person, less than all but a handful of states. The state collected little in the way of taxes despite the fact that all income over $14,000 was taxed at 7%, the state’s highest personal income tax rate. However, not all taxes in South Carolina were low: the state’s excise tax on beer was the fifth highest in the country, at 77 cents per gallon.

9. Nevada
> Taxes paid by residents as pct. of income: 8.2%
> Total state and local taxes collected: $10.14 billion (19th lowest)
> Pct. of total taxes paid by residents: 56.0% (6th lowest)
> Pct. of total taxes paid by non-residents: 44.0% (6th highest)

Fortunately for Nevadans, the state’s large gaming industry helps to alleviate the tax  burden, as only 56% of taxes paid to Nevada and its local government came from residents. Nevada charges a 6.75% tax on gross gaming wins, although the American Gaming Association noted that Indiana and Pennsylvania collected more in direct gambling taxes than Nevada in 2010. The state doesn’t charge any income tax, but it was able to gain revenue from its residents in other ways. The state’s sales tax of 6.85% was the eighth highest in the country. Nevada also had a 33.1 cent excise tax on a gallon of gasoline, the sixth highest in the U.S.

Also Read: America’s Richest States

8. Alabama
> Taxes paid by residents as pct. of income: 8.2%
> Total state and local taxes collected: $13.28 billion (25th lowest)
> Pct. of total taxes paid by residents: 68.0% (21st lowest)
> Pct. of total taxes paid by non-residents: 32.0% (21st highest)

Alabama has the seventh lowest per capita income in the U.S., at $33,499.  However, residents also have a low 8.2% tax burden, compared to a 9.9% national average. In 2010, Alabama residents paid $2,740 in taxes per capita, the third lowest of all states. Contributing to the low tax burden was a property tax per capita of $506, the lowest of all 50 states. Alabama’s sales tax of 4% is below the national median of 6%. Alabama’s cost-of-living index was also among the lowest in the country.

7. New Hampshire
> Taxes paid by residents as pct. of income: 8.1%
> Total state and local taxes collected: $5.02 billion (9th lowest)
> Pct. of total taxes paid by residents: 56.3% (7th lowest)
> Pct. of total taxes paid by non-residents: 43.7% (7th highest)

While New Hampshire residents in 2010 paid $2,210 per capita in taxes to the state, residents also paid $1,507 out-of-state, the fifth-highest amount in the country. The Tax Foundation notes that New Hampshire had “one of the nation’s most simple and inexpensive” personal income tax systems in the country. The state had a flat income tax of 5%, and even that was just on dividend and interest income, giving many citizens little or no income tax liability. New Hampshire was also one of just five states without a sales tax. It is therefore heavily reliant on property taxes, which were 5.68% of income in 2010, the highest rate in the country.

6. Texas
> Taxes paid by residents as pct. of income: 7.9%
> Total state and local taxes collected: $86.50 billion (3rd highest)
> Pct. of total taxes paid by residents: 63.8% (15th lowest)
> Pct. of total taxes paid by non-residents: 36.2% (15th highest)

Texas’ state and local tax burden of 7.9% was unchanged in 2010 compared to 2009, and has been below 8% since 1996. The low tax burden was helped by the fact that individuals arenot required to pay any income tax. Texas had a 6.25% sales tax, 13th highest of all states, and property tax collections of $1,461 per capita were 14th highest. Because it is the second most populous state, Texas still collected over $86 billion in state and local taxes, more than all states except California and New York.
5. Wyoming
> Taxes paid by residents as pct. of income: 7.8%
> Total state and local taxes collected: $3.48 billion (5th lowest)
> Pct. of total taxes paid by residents: 33.1% (2nd lowest)
> Pct. of total taxes paid by non-residents: 66.9% (2nd highest)

Wyoming is just one of two states where more than two-thirds of the total tax revenue came from non-residents. The oil and gas industry provided $1.9 billion to state coffers in fiscal 2010. The state is just one of seven that does not levy any income tax, while its 4% sales tax was significantly lower than the national median of 6%. Wyoming residents made that up in property taxes. State and local governments received $2,321 in property taxes per capita, the fourth highest in the U.S.

4. Louisiana
> Taxes paid by residents as pct. of income: 7.8%
> Total state and local taxes collected: $16.15 billion (24th highest)
> Pct. of total taxes paid by residents: 53.1% (4th lowest)
> Pct. of total taxes paid by non-residents: 46.9% (4th highest)

The tax burden on Louisiana residents fell from 8.2% in 2009 to 7.8% in 2010. Property taxes were low, at just $698 per capita. Sales taxes of 4% also ranked below the national median of 6%. While the state’s top income tax rate of 6% as high, this rate kicked in only for income above $50,000. Total income tax collections in Louisiana came to just over $500 per person in 2010, compared to a national rate of $767 per person.

Also Read: America’s Poorest States

3. Tennessee
> Taxes paid by residents as pct. of income: 7.7%
> Total state and local taxes collected: $18.24 billion (23rd highest)
> Pct. of total taxes paid by residents: 63.2% (13th lowest)
> Pct. of total taxes paid by non-residents: 36.8% (13th highest)

In Tennessee, residents paid just 7.7% of their income in taxes in 2010, the nation’s third-lowest rate. However, of the $2,707 in tax revenue per person that residents paid, just $1,844 was paid out to Tennessee, with the rest going to other states. Tennessee had a 6% personal income flat tax, although this only applied to interest and dividend income. Tennessee also did not charge any state-level property taxes, and localities’ property tax collections equaled just 2.18% of income, less than all but a half-dozen states. However, Tennessee’s combined state and local sales tax rate of 9.43% was the nation’s highest.

2. South Dakota
> Taxes paid by residents as pct. of income: 7.6%
> Total state and local taxes collected: $2.58 billion (the lowest)
> Pct. of total taxes paid by residents: 57.0% (8th lowest)
> Pct. of total taxes paid by non-residents: 43.0% (8th highest)

South Dakota collected just under $2.6 billion in taxes in 2010, less than any other state. It collected just $1,857 per resident, less than only Mississippi, Tennessee and Alabama. This is accounted for by the fact that South Dakota has no personal or corporate income tax, although the Tax Foundation noted that there is a bank franchise and bank card tax.

1. Alaska
> Taxes paid by residents as pct. of income: 7.0%
> Total state and local taxes collected: $6.17 billion (11th lowest)
> Pct. of total taxes paid by residents: 24.5% (the lowest)
> Pct. of total taxes paid by non-residents: 75.5% (the highest)

Less than a quarter of all taxes in Alaska were paid by residents, by far the lowest rate in the U.S. Oil taxes made up the vast majority of the state’s revenue collection, amounting to $6.2 billion in 2010 and $7 billion in 2011, and likely to be even higher in 2012 due to rising oil prices. Alaska was one of just seven states without an individual income tax and one of just five without a state sales tax. However, Alaska collected  $1,714 in property taxes per capita, the 10th highest of all states.

-By Michael B. Sauter, Samuel Weigley, Alexander E.M. Hess, and Brian Zajac