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.
| State | Rank | Tax Burden as % of Income | Per Capita Taxes | Per Capita Income |
|---|---|---|---|---|
| Vermont | 1 | 14.10% | $5,387 | $38,306 |
| Maine | 2 | 14.00% | $5,045 | $36,117 |
| New York | 3 | 13.80% | $6,522 | $47,176 |
| Rhode Island | 4 | 12.70% | $5,291 | $41,809 |
| Ohio | 5 | 12.40% | $4,597 | $37,020 |
| Hawaii | 6 | 12.40% | $5,014 | $40,455 |
| Wisconsin | 7 | 12.30% | $4,736 | $38,639 |
| Connecticut | 8 | 12.20% | $6,756 | $55,536 |
| Nebraska | 9 | 11.90% | $4,549 | $38,373 |
| New Jersey | 10 | 11.60% | $5,991 | $51,605 |
| Minnesota | 11 | 11.50% | $4,971 | $43,121 |
| California | 12 | 11.50% | $4,965 | $43,338 |
| Arkansas | 13 | 11.30% | $3,514 | $31,145 |
| Michigan | 14 | 11.20% | $4,202 | $37,538 |
| Kansas | 15 | 11.20% | $4,330 | $38,732 |
| Washington | 16 | 11.10% | $4,604 | $41,530 |
| Louisiana | 17 | 11.00% | $3,808 | $34,501 |
| Iowa | 18 | 11.00% | $4,085 | $37,068 |
| North Carolina | 19 | 11.00% | $3,933 | $35,705 |
| Kentucky | 20 | 10.90% | $3,568 | $32,673 |
| West Virginia | 21 | 10.90% | $3,401 | $31,198 |
| Illinois | 22 | 10.80% | $4,594 | $42,428 |
| Maryland | 23 | 10.80% | $5,341 | $49,324 |
| Pennsylvania | 24 | 10.80% | $4,405 | $40,942 |
| Indiana | 25 | 10.70% | $3,887 | $36,169 |
| South Carolina | 26 | 10.70% | $3,520 | $32,790 |
| Utah | 27 | 10.70% | $3,452 | $32,249 |
| Massachusetts | 28 | 10.60% | $5,419 | $51,297 |
| Mississippi | 29 | 10.50% | $3,103 | $29,582 |
| Colorado | 30 | 10.40% | $4,509 | $43,512 |
| Arizona | 31 | 10.30% | $3,603 | $34,836 |
| Georgia | 32 | 10.30% | $3,615 | $35,210 |
| Virginia | 33 | 10.20% | $4,460 | $43,710 |
| Missouri | 34 | 10.10% | $3,678 | $36,341 |
| Idaho | 35 | 10.10% | $3,367 | $33,274 |
| Nevada | 36 | 10.10% | $4,127 | $40,916 |
| Oregon | 37 | 10.00% | $3,747 | $37,356 |
| Florida | 38 | 10.00% | $3,962 | $39,782 |
| North Dakota | 39 | 9.90% | $3,626 | $36,635 |
| New Mexico | 40 | 9.80% | $3,251 | $33,163 |
| Montana | 41 | 9.70% | $3,353 | $34,415 |
| Wyoming | 42 | 9.50% | $4,340 | $45,881 |
| Texas | 43 | 9.30% | $3,533 | $38,005 |
| South Dakota | 44 | 9.00% | $3,435 | $38,072 |
| Oklahoma | 45 | 9.00% | $3,248 | $36,077 |
| Alabama | 46 | 8.80% | $3,090 | $35,007 |
| Delaware | 47 | 8.80% | $3,804 | $43,471 |
| Tennessee | 48 | 8.50% | $3,054 | $35,960 |
| New Hampshire | 49 | 8.00% | $3,504 | $43,745 |
| Alaska | 50 | 6.60% | $2,729 | $41,469 |
| District of Columbia | 12.50% | $7,873 | $62,852 |
