Highest Tax Burdens by State
The ten states with the highest tax burdens are New York, Connecticut, Hawaii, Vermont, California, New Jersey, Illinois, Virginia, Delaware, and Maine. New York tops the list with a state-local tax burden at 15.90%. In 2020, the state collected income taxes that amounted to 4.7% of per capita personal income, or nearly $3,500 per person.
Tax-Friendly States for Retirement
Most tax-friendly states for retirement are Alaska, Alabama, Florida. Six out of the top 10 most tax-friendly states have zero income tax.
Tax Rates by State
Tax levels vary at the state level, with heavy burdens in the Northeast and light tax levels across rural states like Alaska, Montana, and North Dakota. The wealthiest 1% of households in Washington pay just 2.4% of their income in taxes, nearly the lowest rate, while the poorest 20% pay nearly 17%, the highest such rate nationwide.
Oregon, New Hampshire, Montana, and Delaware have no sales tax.
States to Avoid Taxes
States that do not levy taxes include Wyoming and South Dakota. States with the lowest rates include North Carolina, North Dakota, Colorado, Arizona, Kentucky, Mississippi, South Carolina, and Utah. "No-income-tax states have property taxes 3% to 6% above income-tax states and sales taxes 15% to 20% above income-tax states," the Center on Budget and Policy Priorities told Yahoo Finance.
Tax Analysis
10 states with highest and lowest income tax rates. Analysis shows higher population growth in lower tax states. MoneyGeek’s analysis suggests taxes influence relocation decisions.
To generate each state’s tax bill:
- Income taxes at Federal and State level (including FICA)
- Property taxes
- Sales taxes
Incomes are based on 2019 median household figures. Property taxes use each state’s average rate from Tax Foundation and Zillow’s median home value index data as of March 2021. Sales taxes use each state’s “combined rate,” from Tax Foundation, against average annual consumer expenditure.
This chart compares the rates of a household earning the median $36,841 to one earning enough, $1,860,848, to enter the top 0.1%.
Tax-Friendly States
The number one retirement tax-friendly state is Alaska. Inheritance, estate, and income taxes are exempt. However, at 1.19 percent of home value, Alaska’s typical property tax is among the highest.
State Rankings for Different Tax Types
One part of the report shows state rankings for different tax types. No state ranks top 10 in all five categories, though Florida, North Carolina, and Utah score well across categories.
Tax Day and Overall Burdens
Tax Day approaches, and Americans will file income taxes by April 18.
The following 5 states have no statewide sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. Nine states — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming — have no income taxes.
| State’s Total Burden (%) | Best to Worst Rank | Affordability Rank | "Best States to Live In" Rank |
|---|---|---|---|
| Data not provided | Data not provided | Data not provided | Data not provided |