With Tax Day — April 15, 2020 — drawing ever closer, Americans from all corners of the country will be completing and submitting their 1040 forms to the Internal Revenue Service in the coming weeks and months. While every American is subject to the same federal tax code, state and local tax laws vary dramatically by region — and so does the overall financial burden of those taxes.
In addition to the federal income tax paid in April, most state governments also levy an income tax. And many state and local governments also levy property and sales taxes. All told, the typical American pays just over $5,000 a year in state and local taxes, equal to 9.8% of their estimated annual income. The national average, however, is not representative of the typical tax burden on a state level.
24/7 Wall St. reviewed the total tax payments as a share of income on a per capita basis to identify the states with the lowest and highest tax burden. Federal taxes were not included in the calculation.
Of the property, sales, and income taxes, property taxes account for the largest share of state and local government revenue on average nationwide. More so than other forms of taxes, property taxes are often set by local authorities, including cities, counties, and school boards. Still, state governments often establish parameters in order to keep property tax rates somewhat uniform. The states with the highest overall tax burdens tend to have higher than average property taxes. These are the states with the highest (and lowest) property taxes.
Most of the states with the lowest tax burden share is the lack of a statewide income tax. Each of the seven states that do not levy any form of personal income tax has a lower overall tax burden than the national average. While tax codes that impose little or no income tax tend to have a lower overall tax burden, the wealthiest residents typically benefit the most. Here is a look at the most tax-friendly states for the rich.
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