Avoid these high-tax states: After the Internal Revenue Service claims its money from you, the next largest big ticket tax you have to pay is to the state where you live.
Personal Income Tax
Forty-one states and the District of Columbia levy a personal income tax.
A comparison of 2018 tax rates compiled by the Federation of Tax Administrators ranks California as the top taxer with a 12.3 percent rate, unless you make more than $1 million and have to pay 13.3 percent.
The 10 highest income tax states for 2018 are:
- California 13.3%
- Hawaii 11%
- Oregon 9.9%
- Minnesota 9.85%
- Iowa 8.98%
- New Jersey 8.97%
- Vermont 8.95%
- District of Columbia 8.95%
- New York 8.82%
- Wisconsin 7.65%
Property Taxes
Property tax falls under local, not state, jurisdiction. The most expensive property tax counties in terms of percent of income, according to the Tax Foundation’s analysis of the U.S. Census Bureau’s 2009 American Community Survey were:
- Passaic County, New Jersey 8.79%
- Essex County, New Jersey 8.27%
- Union County, New Jersey 8.13%
Sales Tax
If you’re a consumer, you should know that all but five states—Oregon, New Hampshire, Montana, Delaware and Alaska – rely on sales tax for revenue. Of these five states, Alaska also has no income tax, thanks to the severance tax it levies on oil and natural gas production. However, 37 states, including sales-tax-free Alaska and Montana, allow local municipalities to impose a sales tax, which can add up to chip away at your disposable income.
Lake Providence, Louisiana has the distinction of most expensive sales tax city in the country in 2018: a 12 percent combined state and city rate.
The top five states with the highest total sales tax states as ranked by the Tax Foundation for 2018 were (combination of state and average local sales tax):
- Louisiana 9.98%
- Tennessee 9.46%
- Arkansas 9.30%
- Alabama 9.01%
- Washington 8.92%
Combined sales and income tax leaders
The Tax Foundation interprets individual tax burden by what taxpayers actually spend in local and state taxes, rather than report these expenses from the state revenue perspective used by the Census Bureau. Its State and Local Tax Burden Rankings study reported that Americans paid an average rate of 9.9 percent in state and local taxes in 2012. According to the foundation, the five highest state-local tax states were:
- New York 12.7 %
- Connecticut 12.6%
- New Jersey 12.2%
- Illinois 11.0%
- California and Wisconsin 11.0%
The same states have ranked as the top three consistently since 2005, according to the foundation. “Lots of people want to relocate for lifestyle issues,” says Walter Molony of the National Association of Realtors. “Some seek a nicer climate. If all things are equal between climate choices, the tax situation becomes an area worth exploring.”