Perspectives On Wealth

2019’s Best States to Be Rich or Poor from a Tax Perspective

New data highlights taxes as a ‘share of a person’s income’ and raises a question of fairness in the tax code

A new study from wallethub.com’s Adam McCann reveals the impact of regressive taxation. Reprinted with permission form wallethub.com. Read the entire report here.

It’s tax season, and Uncle Sam is back to collect what’s due. But some Americans are hit harder by taxes than others. The Institute on Taxation & Economic Policy, or ITEP, found in its latest report that many taxes — including property taxes, sales taxes, and some state and local taxes — are regressive. That means they take more money out of the pockets of Americans in the lower- and middle-income brackets than from wealthier families.

Nationwide average tax rate is 11.4%

After accounting for all taxes, in fact, “The nationwide average effective state and local tax rate is 11.4 percent for the lowest-income 20 percent of individuals and families, 9.9 percent for the middle 20 percent, and 7.4 percent for the top 1 percent,” according to the ITEP. Such findings have brought the question of fairness to the forefront of the current tax season.

With less than a month until the tax deadline for most Americans, WalletHub identified the best states where people in different income brackets spend the most and least on sales and excise taxes, property taxes and income taxes. It’s important to note that our analysis does not focus on tax rates but rather on the share of a person’s income that he or she contributes toward various tax obligations. For instance, tax rates may be lower in one state, but because of a comparatively higher cost of living, the actual tax burden may be higher for that state’s residents. Read on for our findings, along with expert commentary and a detailed description of our methodology.

 

Best States to Be Rich from a Tax PerspectiveWorst States to Be Rich from a Tax Perspective
1Alaska47Vermont
2Nevada48Maryland
3Wyoming49Illinois
4Tennessee50Connecticut
5Florida51New York

 

Best States to Be Poor from a Tax PerspectiveWorst States to Be Poor from a Tax Perspective
1Delaware47Indiana
2Alaska48Pennsylvania
3Montana49Hawaii
4Utah50Illinois
5South Carolina51Washington

 

Key Stats:

  • The overall tax burden for low-income earners is three times higher in Washington than in Delaware.
  • The overall tax burden for middle-income earners is three times higher in New York than in Alaska.
  • The overall tax burden for high-income earners is four times higher in New York than in Alaska.

 

State

“Low Income” Rank
(Tax Burden as a % of Income)

“Middle Income” Rank
(Tax Burden as a % of Income)

“High Income” Rank
(Tax Burden as a % of Income)

Alabama27
(9.80%)
16
(8.66%)
9
(6.31%)
Alaska2
(5.87%)
1
(4.35%)
1
(3.01%)
Arizona42
(11.13%)
23
(9.22%)
21
(8.00%)
Arkansas43
(11.29%)
38
(10.27%)
35
(9.26%)
California24
(9.65%)
24
(9.22%)
34
(9.13%)
Colorado11
(8.84%)
10
(8.27%)
14
(7.58%)
Connecticut37
(10.64%)
41
(10.42%)
50
(11.13%)
Delaware1
(5.24%)
2
(5.74%)
10
(6.88%)
District of Columbia8
(8.80%)
21
(9.08%)
30
(8.72%)
Florida25
(9.68%)
5
(7.26%)
5
(5.45%)
Georgia30
(10.08%)
30
(9.70%)
25
(8.21%)
Hawaii49
(12.94%)
49
(11.59%)
45
(10.34%)
Idaho9
(8.81%)
11
(8.28%)
16
(7.64%)
Illinois50
(13.18%)
50
(11.71%)
49
(11.01%)
Indiana47
(11.82%)
45
(10.71%)
22
(8.01%)
Iowa39
(10.97%)
43
(10.54%)
36
(9.31%)
Kansas34
(10.57%)
42
(10.47%)
41
(9.81%)
Kentucky32
(10.37%)
44
(10.68%)
43
(10.00%)
Louisiana38
(10.72%)
33
(9.77%)
15
(7.60%)
Maine15
(8.93%)
31
(9.71%)
46
(10.47%)
Maryland23
(9.65%)
36
(10.12%)
48
(10.73%)
Massachusetts18
(9.30%)
15
(8.60%)
26
(8.28%)
Michigan19
(9.34%)
27
(9.51%)
18
(7.89%)
Minnesota17
(9.03%)
28
(9.62%)
38
(9.48%)
Mississippi36
(10.63%)
32
(9.75%)
17
(7.77%)
Missouri13
(8.90%)
22
(9.10%)
24
(8.15%)
Montana3
(6.77%)
3
(6.53%)
12
(7.28%)
Nebraska35
(10.62%)
40
(10.42%)
39
(9.60%)
Nevada7
(8.62%)
4
(7.06%)
2
(4.31%)
New Hampshire6
(8.30%)
6
(7.28%)
7
(5.87%)
New Jersey28
(9.87%)
20
(9.01%)
42
(9.88%)
New Mexico41
(11.06%)
35
(9.96%)
28
(8.53%)
New York46
(11.61%)
51
(12.70%)
51
(12.48%)
North Carolina21
(9.42%)
25
(9.26%)
23
(8.07%)
North Dakota26
(9.70%)
12
(8.33%)
8
(6.01%)
Ohio40
(10.99%)
46
(10.81%)
37
(9.39%)
Oklahoma45
(11.54%)
39
(10.31%)
31
(8.72%)
Oregon12
(8.85%)
19
(8.85%)
33
(9.09%)
Pennsylvania48
(12.06%)
47
(11.22%)
40
(9.62%)
Rhode Island29
(10.01%)
26
(9.42%)
32
(9.04%)
South Carolina5
(7.99%)
13
(8.43%)
20
(7.94%)
South Dakota33
(10.38%)
18
(8.80%)
6
(5.76%)
Tennessee22
(9.45%)
9
(8.09%)
4
(5.11%)
Texas44
(11.34%)
34
(9.80%)
11
(7.05%)
Utah4
(7.63%)
8
(7.75%)
19
(7.93%)
Vermont10
(8.81%)
29
(9.63%)
47
(10.62%)
Virginia20
(9.39%)
17
(8.68%)
29
(8.66%)
Washington51
(14.59%)
48
(11.26%)
13
(7.32%)
West Virginia16
(9.02%)
14
(8.50%)
27
(8.44%)
Wisconsin31
(10.11%)
37
(10.25%)
44
(10.15%)
Wyoming14
(8.92%)
7
(7.75%)
3
(5.03%)

 

 

For the full report and to see where your state ranks, please visit here.