Adam McCann, Financial Writer

Mar 5, 2019

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.

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.

Main Findings

Best & Worst States for Low Income Earners

Best & Worst States for High Income Earners

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) Alabama 27

(9.80%) 16

(8.66%) 9

(6.31%) Alaska 2

(5.87%) 1

(4.35%) 1

(3.01%) Arizona 42

(11.13%) 23

(9.22%) 21

(8.00%) Arkansas 43

(11.29%) 38

(10.27%) 35

(9.26%) California 24

(9.65%) 24

(9.22%) 34

(9.13%) Colorado 11

(8.84%) 10

(8.27%) 14

(7.58%) Connecticut 37

(10.64%) 41

(10.42%) 50

(11.13%) Delaware 1

(5.24%) 2

(5.74%) 10

(6.88%) District of Columbia 8

(8.80%) 21

(9.08%) 30

(8.72%) Florida 25

(9.68%) 5

(7.26%) 5

(5.45%) Georgia 30

(10.08%) 30

(9.70%) 25

(8.21%) Hawaii 49

(12.94%) 49

(11.59%) 45

(10.34%) Idaho 9

(8.81%) 11

(8.28%) 16

(7.64%) Illinois 50

(13.18%) 50

(11.71%) 49

(11.01%) Indiana 47

(11.82%) 45

(10.71%) 22

(8.01%) Iowa 39

(10.97%) 43

(10.54%) 36

(9.31%) Kansas 34

(10.57%) 42

(10.47%) 41

(9.81%) Kentucky 32

(10.37%) 44

(10.68%) 43

(10.00%) Louisiana 38

(10.72%) 33

(9.77%) 15

(7.60%) Maine 15

(8.93%) 31

(9.71%) 46

(10.47%) Maryland 23

(9.65%) 36

(10.12%) 48

(10.73%) Massachusetts 18

(9.30%) 15

(8.60%) 26

(8.28%) Michigan 19

(9.34%) 27

(9.51%) 18

(7.89%) Minnesota 17

(9.03%) 28

(9.62%) 38

(9.48%) Mississippi 36

(10.63%) 32

(9.75%) 17

(7.77%) Missouri 13

(8.90%) 22

(9.10%) 24

(8.15%) Montana 3

(6.77%) 3

(6.53%) 12

(7.28%) Nebraska 35

(10.62%) 40

(10.42%) 39

(9.60%) Nevada 7

(8.62%) 4

(7.06%) 2

(4.31%) New Hampshire 6

(8.30%) 6

(7.28%) 7

(5.87%) New Jersey 28

(9.87%) 20

(9.01%) 42

(9.88%) New Mexico 41

(11.06%) 35

(9.96%) 28

(8.53%) New York 46

(11.61%) 51

(12.70%) 51

(12.48%) North Carolina 21

(9.42%) 25

(9.26%) 23

(8.07%) North Dakota 26

(9.70%) 12

(8.33%) 8

(6.01%) Ohio 40

(10.99%) 46

(10.81%) 37

(9.39%) Oklahoma 45

(11.54%) 39

(10.31%) 31

(8.72%) Oregon 12

(8.85%) 19

(8.85%) 33

(9.09%) Pennsylvania 48

(12.06%) 47

(11.22%) 40

(9.62%) Rhode Island 29

(10.01%) 26

(9.42%) 32

(9.04%) South Carolina 5

(7.99%) 13

(8.43%) 20

(7.94%) South Dakota 33

(10.38%) 18

(8.80%) 6

(5.76%) Tennessee 22

(9.45%) 9

(8.09%) 4

(5.11%) Texas 44

(11.34%) 34

(9.80%) 11

(7.05%) Utah 4

(7.63%) 8

(7.75%) 19

(7.93%) Vermont 10

(8.81%) 29

(9.63%) 47

(10.62%) Virginia 20

(9.39%) 17

(8.68%) 29

(8.66%) Washington 51

(14.59%) 48

(11.26%) 13

(7.32%) West Virginia 16

(9.02%) 14

(8.50%) 27

(8.44%) Wisconsin 31

(10.11%) 37

(10.25%) 44

(10.15%) Wyoming 14

(8.92%) 7

(7.75%) 3

(5.03%)

Detailed Findings

State Income Level Sales & Excise Tax as % of Income Property Tax as % of Income Income Tax as % of Income Total Tax as % of Income Alabama Low 6.40% 1.30% 2.10% 9.80% Middle 4.93% 1.25% 2.49% 8.66% High 2.87% 1.00% 2.44% 6.31% Alaska Low 2.68% 3.19% 0.00% 5.87% Middle 1.73% 2.62% 0.00% 4.35% High 0.81% 2.20% 0.00% 3.01% Arizona Low 6.89% 3.40% 0.85% 11.13% Middle 5.11% 2.65% 1.46% 9.22% High 2.98% 2.51% 2.51% 8.00% Arkansas Low 8.23% 1.84% 1.22% 11.29% Middle 6.30% 1.54% 2.44% 10.27% High 3.73% 1.39% 4.14% 9.26% California Low 6.37% 3.23% 0.05% 9.65% Middle 4.74% 3.12% 1.36% 9.22% High 2.56% 2.96% 3.61% 9.13% Colorado Low 5.40% 2.36% 1.08% 8.84% Middle 4.15% 2.20% 1.92% 8.27% High 2.37% 1.90% 3.30% 7.58% Connecticut Low 5.76% 4.45% 0.43% 10.64% Middle 4.14% 3.98% 2.30% 10.42% High 2.42% 4.41% 4.31% 11.13% Delaware Low 2.06% 1.63% 1.54% 5.24% Middle 1.39% 1.45% 2.89% 5.74% High 0.74% 1.62% 4.51% 6.88% District of Columbia Low 5.77% 2.93% 0.10% 8.80% Middle 4.66% 1.97% 2.45% 9.08% High 2.58% 1.75% 4.39% 8.72% Florida Low 7.08% 2.60% 0.00% 9.68% Middle 5.17% 2.08% 0.00% 7.26% High 2.35% 3.10% 0.00% 5.45% Georgia Low 5.84% 2.32% 1.92% 10.08% Middle 4.39% 2.30% 3.00% 9.70% High 2.47% 2.03% 3.72% 8.21% Hawaii Low 8.43% 2.42% 2.09% 12.94% Middle 5.96% 1.90% 3.74% 11.59% High 3.31% 1.77% 5.26% 10.34% Idaho Low 5.29% 2.85% 0.67% 8.81% Middle 4.23% 2.21% 1.84% 8.28% High 2.45% 1.18% 4.01% 7.64% Illinois Low 5.79% 5.10% 2.28% 13.18% Middle 4.29% 4.52% 2.90% 11.71% High 2.62% 4.60% 3.80% 11.01% Indiana Low 6.16% 2.79% 2.88% 11.82% Middle 4.78% 2.36% 3.56% 10.71% High 2.87% 1.55% 3.59% 8.01% Iowa Low 5.66% 4.10% 1.21% 10.97% Middle 4.51% 3.14% 2.89% 10.54% High 2.65% 2.37% 4.30% 9.31% Kansas Low 7.00% 2.88% 0.68% 10.57% Middle 5.49% 2.66% 2.33% 10.47% High 3.38% 2.50% 3.92% 9.81% Kentucky Low 5.10% 1.87% 3.40% 10.37% Middle 3.94% 1.73% 5.01% 10.68% High 2.23% 1.68% 6.09% 10.00% Louisiana Low 8.19% 1.46% 1.07% 10.72% Middle 6.61% 1.05% 2.10% 9.77% High 3.91% 0.73% 2.96% 7.60% Maine Low 5.27% 3.35% 0.31% 8.93% Middle 4.06% 3.52% 2.13% 9.71% High 2.50% 3.35% 4.62% 10.47% Maryland Low 5.03% 2.70% 1.92% 9.65% Middle 3.69% 2.38% 4.05% 10.12% High 2.20% 2.72% 5.81% 10.73% Massachusetts Low 4.10% 3.98% 1.22% 9.30% Middle 2.96% 2.81% 2.83% 8.60% High 1.95% 2.85% 3.49% 8.28% Michigan Low 5.06% 2.52% 1.76% 9.34% Middle 3.75% 2.81% 2.95% 9.51% High 2.00% 2.63% 3.26% 7.89% Minnesota Low 5.64% 2.54% 0.84% 9.03% Middle 4.17% 2.70% 2.75% 9.62% High 2.33% 2.63% 4.52% 9.48% Mississippi Low 6.95% 2.21% 1.47% 10.63% Middle 5.35% 1.93% 2.47% 9.75% High 3.09% 1.70% 2.98% 7.77% Missouri Low 5.20% 2.20% 1.50% 8.90% Middle 4.16% 2.23% 2.71% 9.10% High 2.41% 1.96% 3.78% 8.15% Montana Low 1.70% 3.73% 1.33% 6.77% Middle 1.16% 2.79% 2.58% 6.53% High 0.54% 2.89% 3.86% 7.28% Nebraska Low 5.61% 4.40% 0.61% 10.62% Middle 4.62% 3.72% 2.08% 10.42% High 2.64% 2.82% 4.14% 9.60% Nevada Low 5.63% 1.99% 1.00% 8.62% Middle 4.15% 1.91% 1.00% 7.06% High 1.71% 1.75% 0.86% 4.31% New Hampshire Low 2.03% 5.71% 0.56% 8.30% Middle 1.35% 5.43% 0.50% 7.28% High 0.72% 4.60% 0.54% 5.87% New Jersey Low 4.73% 5.04% 0.10% 9.87% Middle 3.48% 4.74% 0.78% 9.01% High 2.32% 5.20% 2.35% 9.88% New Mexico Low 8.35% 2.61% 0.10% 11.06% Middle 6.23% 2.17% 1.56% 9.96% High 3.64% 1.91% 2.98% 8.53% New York Low 6.18% 5.10% 0.32% 11.61% Middle 4.81% 4.55% 3.33% 12.70% High 2.84% 4.53% 5.11% 12.48% North Carolina Low 5.44% 2.28% 1.69% 9.42% Middle 4.36% 2.02% 2.87% 9.26% High 2.52% 1.78% 3.77% 8.07% North Dakota Low 7.22% 2.07% 0.41% 9.70% Middle 6.06% 1.68% 0.59% 8.33% High 3.34% 1.62% 1.05% 6.01% Ohio Low 5.91% 2.90% 2.18% 10.99% Middle 4.67% 3.00% 3.14% 10.81% High 2.88% 2.61% 3.90% 9.39% Oklahoma Low 7.87% 2.60% 1.07% 11.54% Middle 6.07% 1.95% 2.28% 10.31% High 3.44% 2.22% 3.06% 8.72% Oregon Low 1.79% 4.08% 2.99% 8.85% Middle 1.10% 3.20% 4.55% 8.85% High 0.42% 2.53% 6.14% 9.09% Pennsylvania Low 5.55% 3.15% 3.36% 12.06% Middle 4.31% 2.69% 4.21% 11.22% High 2.40% 3.18% 4.04% 9.62% Rhode Island Low 5.56% 4.06% 0.38% 10.01% Middle 4.02% 3.57% 1.83% 9.42% High 2.03% 3.53% 3.47% 9.04% South Carolina Low 4.78% 2.41% 0.81% 7.99% Middle 3.80% 2.34% 2.29% 8.43% High 2.05% 2.14% 3.75% 7.94% South Dakota Low 8.01% 2.38% 0.00% 10.38% Middle 6.64% 2.15% 0.00% 8.80% High 3.60% 2.16% 0.00% 5.76% Tennessee Low 7.72% 1.63% 0.10% 9.45% Middle 6.17% 1.82% 0.10% 8.09% High 3.32% 1.68% 0.11% 5.11% Texas Low 8.46% 2.88% 0.00% 11.34% Middle 6.60% 3.19% 0.00% 9.80% High 3.66% 3.39% 0.00% 7.05% Utah Low 4.67% 1.65% 1.31% 7.63% Middle 3.75% 1.56% 2.44% 7.75% High 2.13% 1.67% 4.13% 7.93% Vermont Low 4.49% 4.24% 0.08% 8.81% Middle 3.76% 4.55% 1.32% 9.63% High 2.02% 4.91% 3.69% 10.62% Virginia Low 4.68% 2.64% 2.08% 9.39% Middle 3.54% 2.37% 2.77% 8.68% High 2.16% 2.62% 3.88% 8.66% Washington Low 11.14% 3.45% 0.00% 14.59% Middle 8.65% 2.61% 0.00% 11.26% High 4.84% 2.48% 0.00% 7.32% West Virginia Low 5.22% 1.88% 1.93% 9.02% Middle 3.98% 1.48% 3.04% 8.50% High 2.51% 1.25% 4.68% 8.44% Wisconsin Low 5.13% 3.88% 1.10% 10.11% Middle 3.88% 3.40% 2.96% 10.25% High 2.27% 3.18% 4.69% 10.15% Wyoming Low 6.24% 2.69% 0.00% 8.92% Middle 5.25% 2.50% 0.00% 7.75% High 2.76% 2.27% 0.00% 5.03%

Note: The small difference that might exist in some cases when adding up the sub-components is the consequence of rounding to two decimal points the results.

Ask the Experts

Fairness is a central issue of the current tax season. For additional insight on the most pressing tax problems, possible solutions and other tax-related matters, we asked a panel of experts to weigh in. Click on the experts’ profiles to read their bios and responses to the following key questions:

What is the most efficient way to distribute tax burden across income levels? Which state and local tax instruments are the most and least fair? What makes some state and local tax systems better able to weather economic downturns? How do American notions of economic mobility inform tax preferences and tax policy?

Methodology

In order to identify the best states to be taxed according to one’s income group, WalletHub generated estimates of the state-specific tax burden on residents at three income levels — low ($25,000), medium ($50,000) and high ($150,000) — in each of the 50 U.S. states and the District of Columbia. We did so using data from the Institute on Taxation & Economic Policy's 2018 report, which published estimates of tax burden at seven points in the state-specific income distribution.

As we were interested in comparing tax burdens for households at the same income level across states, we fit a regression model to estimate the relationship between income and tax burden for each state and the District of Columbia using log transformations to improve model fit and using this model to generate predicted tax burdens at the income levels we examined.



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