States with the Highest and Lowest Tax Burdens

Vermont Governor Peter Shumlin presides over the most taxed constituents

Taxes, fees, and taxes by any other name are on the increase in many states as the states fight their way out of the recession. As unemployment rolls have lengthened and funds from Washington have decreased, states have had little option but to cut services and/or increase taxes.

This article describes those states that impose the greatest tax burdens on their residents and those that have the least tax burden. Bear in mind though, that individual tax burdens may vary greatly by municipality within a state, so these tax burden comparisons may not reflect your exact circumstances.

States use a varying combinations of sales taxes, excise taxes, license taxes, income taxes, intangible taxes, property taxes, estate taxes, inheritance taxes, and user fees. Some are imposed directly on residents and other imposed indirectly e.g., cigarette taxes.

Connecticut is an example of a state with a raft of new taxes in 2011. New and Increased taxes in the state include:
• Income tax increases in all brackets
• Sales tax increase, from 6% to 6.35%
• Clothing under $50 now subject to sales tax
• New tax on non-prescription drugs, vitamins, manicures/pedicures, yoga
• Increased taxes on hotel rooms, cigarettes, alcohol
• Expansion of the gift and estate taxes
• Conveyance tax increase
• Real estate conveyance tax made permanent
• Decrease of $200 in property tax credit
• Diesel fuel tax increase from 26¢ to 29¢
• Increase in driver’s license and vehicle registration fees
• A possible hike in the corporate surcharge tax

An Individual Caveat
Depending on where you live and how you live (e.g., rent vs own, smoker vs non-smoker), you may end up paying more or fewer taxes.

First off, all states except Alaska, Delaware, Montana, New Hampshire and Oregon, collect sales taxes. Delaware collects a Gross Receipts Tax (GRT) which is a business and gross receipts tax of roughly 2.07%.

Some states allow local city and county taxes in addition to the base tax rate. Those that do not i.e., use a single rate are Connecticut, District of Columbia, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, Mississippi, Rhode Island, and West Virginia.

A total of 41 states impose income taxes. New Hampshire and Tennessee apply it only to income from interest and dividends.

Who Does Not Tax Personal Income?
Seven states (Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming) do not tax personal income. Of the 41 with a broad-based income tax, 35 base the taxes on federal returns, typically taking a portion of what you pay the IRS or using your federal adjusted gross income or taxable income as the starting point.

The top 12 states with the highest state tax on cigarettes are: New York ($4.35), Rhode Island ($3.46), Washington ($3.025), Connecticut ($3.00), New Jersey ($2.70), Wisconsin ($2.52), Massachusetts ($2.51), District of Columbia ($2.50), and Vermont ($2.24)

We present below the ranking of state tax burdens from 2010, derived from Bureau of Economic Analysis, Census Bureau and Tax Foundation.

StateRankTax Burden as % of IncomePer Capita TaxesPer Capita Income
Vermont114.10%$5,387 $38,306
Maine214.00%$5,045 $36,117
New York313.80%$6,522 $47,176
Rhode Island412.70%$5,291 $41,809
Ohio512.40%$4,597 $37,020
Hawaii612.40%$5,014 $40,455
Wisconsin712.30%$4,736 $38,639
Connecticut812.20%$6,756 $55,536
Nebraska911.90%$4,549 $38,373
New Jersey1011.60%$5,991 $51,605
Minnesota1111.50%$4,971 $43,121
California1211.50%$4,965 $43,338
Arkansas1311.30%$3,514 $31,145
Michigan1411.20%$4,202 $37,538
Kansas1511.20%$4,330 $38,732
Washington1611.10%$4,604 $41,530
Louisiana1711.00%$3,808 $34,501
Iowa1811.00%$4,085 $37,068
North Carolina1911.00%$3,933 $35,705
Kentucky2010.90%$3,568 $32,673
West Virginia2110.90%$3,401 $31,198
Illinois2210.80%$4,594 $42,428
Maryland2310.80%$5,341 $49,324
Pennsylvania2410.80%$4,405 $40,942
Indiana2510.70%$3,887 $36,169
South Carolina2610.70%$3,520 $32,790
Utah2710.70%$3,452 $32,249
Massachusetts2810.60%$5,419 $51,297
Mississippi2910.50%$3,103 $29,582
Colorado3010.40%$4,509 $43,512
Arizona3110.30%$3,603 $34,836
Georgia3210.30%$3,615 $35,210
Virginia3310.20%$4,460 $43,710
Missouri3410.10%$3,678 $36,341
Idaho3510.10%$3,367 $33,274
Nevada3610.10%$4,127 $40,916
Oregon3710.00%$3,747 $37,356
Florida3810.00%$3,962 $39,782
North Dakota399.90%$3,626 $36,635
New Mexico409.80%$3,251 $33,163
Montana419.70%$3,353 $34,415
Wyoming429.50%$4,340 $45,881
Texas439.30%$3,533 $38,005
South Dakota449.00%$3,435 $38,072
Oklahoma459.00%$3,248 $36,077
Alabama468.80%$3,090 $35,007
Delaware478.80%$3,804 $43,471
Tennessee488.50%$3,054 $35,960
New Hampshire498.00%$3,504 $43,745
Alaska506.60%$2,729 $41,469
District of Columbia12.50%$7,873 $62,852

  • Jared

    So that’s how my tax money is divided.  It’s unnerving to know that despite the high tax imposed on cigarettes, a lot of people still smoke.  And, what was surprising are the states that do not levy personal income taxes but derive income from the federal taxes that is paid on this income.  Would this mean that living in California would have me paying taxes on my personal income twice?  I hope you could enlighten me more on this.

  • Vanessa

    I’m wondering why Vermont has the highest tax burden.  It would be great though to know what other taxes do we need to pay aside from those mentioned in this article.  Kudos to your article, it’s really helpful.

  • Glenn

    Thanks for sharing. Readers will now know it clearly. Is
    true the higher the tax in that state, the better the services? Does it show
    they have better economy than the others?