State taxes can be a financial burden on some residents. California, Hawaii, and New Jersey each have state taxes over 10%. Add that to federal taxes and some well-to-do people in these states have a total tax burden that can be a third or more of their income.
High taxes have driven people out of some states. Several financial firms and extremely rich financiers have left New York for Florida. For the richest among them, the tax savings can be well into the millions of dollars each year.
According to the Tax Foundation, the 84-year-old tax policy nonprofit, state and local taxes currently make up 11.2% of gross national product, the total value of goods produced by a country over the course of a year. This includes several public revenue sources like taxes on property, general sales, income and corporate income, licenses, and excise taxes on alcoholic beverages, tobacco, and other products.
To determine the state where Americans are paying the most taxes, 24/7 Wall St. reviewed data from the report State and Local Tax Burdens, Calendar Year 2022 published by the Tax Foundation. States were ranked by their tax burden, from low to high. We also estimated income per capita by state from the tax burden share and tax amount paid.
The Tax Foundation defines tax burden as state and local taxes paid by a state’s residents divided by that state’s share of net national product. Unlike tax collections, which represent all taxes made to state and local governments, “tax burdens estimates allocate taxes to states that are economically affected by them” per the Tax Foundation. That is, the measure of tax burden attempts to measure the economic incidence, not the legal one.
State and local tax burdens have increased since 2020 to the highest level since 1978. According to the Tax Foundation, “pandemic-era economic changes caused taxable income, activities, and property values to rise faster than net national product.”
The 10 states with the highest state-local tax burdens in 2022 range from Maine and Delaware with a 12.4% tax burden to New York’s 15.9% tax burden.
Four states with populations of under 1 million are among the states with the lowest combined state and local effective tax burdens. Those 10 states have tax burdens ranging from Alaska’s 4.6% to Oklahoma’s 9%. Texas, the country’s second-largest state by population, has the sixth-lowest state and local effective tax burden at 8.6%. Two other states with large populations, Michigan and Tennessee, are also low-burden states.
The state with the highest tax burden is New York. Here are the details:
> State-local tax burden: 15.9% of income
> State-local taxes paid: $12,083
> Est. income: $75,994 per capita
States Where People Are Paying the Most Taxes
Sponsored: Find a Qualified Financial Advisor:
Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. If you’re ready to be matched with local advisors that can help you achieve your financial goals, get started now.
Source: Read Full Article