Best States to Be Rich or Poor from a Tax Perspective
It’s tax season, and Uncle Sam’s back not only to collect but also, it seems, to kick Americans who are already down. The Institute on Taxation & Economic Policy, or ITEP, found in its latest report that many taxes — including payroll taxes, sales taxes, and some state and local taxes — are regressive, which 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 rates by income group are 10.9 percent for the poorest 20 percent of individuals and families, 9.4 percent for the middle 20 percent and 5.4 percent for the top 1 percent,” according to the ITEP. Such disappointing 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. Our findings, as well as expert commentary and a detailed methodology, can be found below.
Main Findings
Best & Worst States for Low Income Earners
Best & Worst States for High Income Earners
|
State |
“Low Income” Rank |
“Middle Income” Rank |
“High Income” Rank |
|---|---|---|---|
| Alabama | 25 (9.61%) |
20 (8.82%) |
9 (6.03%) |
| Alaska | 1 (5.40%) |
1 (4.50%) |
1 (3.43%) |
| Arizona | 48 (11.70%) |
18 (8.75%) |
18 (7.36%) |
| Arkansas | 46 (11.46%) |
49 (11.29%) |
37 (9.16%) |
| California | 21 (9.49%) |
15 (8.58%) |
39 (9.35%) |
| Colorado | 14 (8.68%) |
17 (8.73%) |
16 (7.26%) |
| Connecticut | 34 (10.04%) |
46 (10.77%) |
50 (11.19%) |
| Delaware | 2 (5.43%) |
2 (5.70%) |
10 (6.14%) |
| District of Columbia | 7 (7.76%) |
37 (10.16%) |
43 (9.80%) |
| Florida | 17 (9.23%) |
10 (7.67%) |
7 (5.56%) |
| Georgia | 30 (9.87%) |
30 (9.77%) |
30 (8.46%) |
| Hawaii | 50 (12.30%) |
48 (10.86%) |
31 (8.72%) |
| Idaho | 11 (8.47%) |
11 (7.73%) |
22 (7.94%) |
| Illinois | 49 (12.10%) |
50 (11.30%) |
44 (9.83%) |
| Indiana | 44 (11.19%) |
45 (10.72%) |
24 (8.19%) |
| Iowa | 39 (10.47%) |
35 (10.03%) |
33 (8.90%) |
| Kansas | 29 (9.84%) |
26 (9.50%) |
26 (8.31%) |
| Kentucky | 41 (10.62%) |
40 (10.44%) |
35 (9.10%) |
| Louisiana | 35 (10.05%) |
27 (9.57%) |
14 (6.91%) |
| Maine | 20 (9.35%) |
28 (9.60%) |
41 (9.59%) |
| Maryland | 26 (9.70%) |
47 (10.80%) |
49 (10.40%) |
| Massachusetts | 32 (9.92%) |
31 (9.85%) |
38 (9.16%) |
| Michigan | 22 (9.50%) |
25 (9.50%) |
25 (8.19%) |
| Minnesota | 24 (9.58%) |
33 (9.94%) |
47 (9.92%) |
| Mississippi | 42 (10.77%) |
38 (10.19%) |
15 (7.12%) |
| Missouri | 23 (9.51%) |
22 (9.20%) |
27 (8.32%) |
| Montana | 3 (6.10%) |
4 (6.59%) |
12 (6.42%) |
| Nebraska | 36 (10.23%) |
39 (10.41%) |
36 (9.14%) |
| Nevada | 4 (7.00%) |
3 (6.28%) |
3 (4.71%) |
| New Hampshire | 8 (7.99%) |
8 (7.43%) |
6 (5.36%) |
| New Jersey | 33 (10.03%) |
29 (9.71%) |
48 (10.29%) |
| New Mexico | 38 (10.37%) |
34 (10.03%) |
21 (7.87%) |
| New York | 43 (10.89%) |
51 (12.41%) |
51 (12.40%) |
| North Carolina | 18 (9.32%) |
24 (9.37%) |
29 (8.40%) |
| North Dakota | 10 (8.37%) |
12 (7.92%) |
8 (5.70%) |
| Ohio | 47 (11.46%) |
41 (10.51%) |
42 (9.62%) |
| Oklahoma | 31 (9.90%) |
23 (9.34%) |
20 (7.77%) |
| Oregon | 9 (7.99%) |
14 (8.51%) |
32 (8.78%) |
| Pennsylvania | 45 (11.39%) |
36 (10.10%) |
34 (8.91%) |
| Rhode Island | 37 (10.28%) |
42 (10.65%) |
45 (9.85%) |
| South Carolina | 5 (7.08%) |
13 (8.01%) |
17 (7.31%) |
| South Dakota | 28 (9.80%) |
7 (7.17%) |
5 (5.17%) |
| Tennessee | 16 (9.17%) |
6 (7.02%) |
4 (4.97%) |
| Texas | 40 (10.57%) |
9 (7.55%) |
13 (6.53%) |
| Utah | 12 (8.60%) |
16 (8.70%) |
19 (7.75%) |
| Vermont | 19 (9.34%) |
32 (9.86%) |
40 (9.44%) |
| Virginia | 15 (8.81%) |
19 (8.80%) |
28 (8.36%) |
| Washington | 51 (13.03%) |
44 (10.69%) |
11 (6.38%) |
| West Virginia | 13 (8.65%) |
21 (8.93%) |
23 (8.13%) |
| Wisconsin | 27 (9.76%) |
43 (10.68%) |
46 (9.89%) |
| Wyoming | 6 (7.68%) |
5 (6.65%) |
2 (3.98%) |
Detailed Findings
| State | Income Level | Sales Tax as % of Income | Property Tax as % of Income | Income Tax as % of Income | Total Tax as % of Income |
|---|---|---|---|---|---|
| Alabama | Low | 6.26% | 1.23% | 2.13% | 9.61% |
| Middle | 5.01% | 1.13% | 2.68% | 8.82% | |
| High | 2.30% | 1.10% | 2.64% | 6.03% | |
| Alaska | Low | 2.44% | 2.80% | 0.16% | 5.40% |
| Middle | 1.65% | 2.75% | 0.10% | 4.50% | |
| High | 0.88% | 2.35% | 0.20% | 3.43% | |
| Arizona | Low | 7.22% | 3.42% | 1.06% | 11.70% |
| Middle | 4.66% | 2.53% | 1.57% | 8.75% | |
| High | 2.72% | 2.27% | 2.37% | 7.36% | |
| Arkansas | Low | 8.06% | 1.56% | 1.85% | 11.46% |
| Middle | 7.13% | 1.50% | 2.66% | 11.29% | |
| High | 3.93% | 1.35% | 3.88% | 9.16% | |
| California | Low | 6.25% | 2.81% | 0.43% | 9.49% |
| Middle | 4.47% | 2.71% | 1.40% | 8.58% | |
| High | 2.35% | 2.85% | 4.15% | 9.35% | |
| Colorado | Low | 4.89% | 2.10% | 1.69% | 8.68% |
| Middle | 4.07% | 2.12% | 2.54% | 8.73% | |
| High | 1.99% | 2.00% | 3.27% | 7.26% | |
| Connecticut | Low | 5.02% | 4.81% | 0.21% | 10.04% |
| Middle | 3.81% | 4.71% | 2.25% | 10.77% | |
| High | 2.46% | 4.33% | 4.40% | 11.19% | |
| Delaware | Low | 2.01% | 1.64% | 1.78% | 5.43% |
| Middle | 1.27% | 1.40% | 3.03% | 5.70% | |
| High | 0.72% | 1.26% | 4.16% | 6.14% | |
| District of Columbia | Low | 5.47% | 2.15% | 0.14% | 7.76% |
| Middle | 4.44% | 2.00% | 3.72% | 10.16% | |
| High | 2.45% | 2.15% | 5.19% | 9.80% | |
| Florida | Low | 7.32% | 1.91% | 0.00% | 9.23% |
| Middle | 5.45% | 2.22% | 0.00% | 7.67% | |
| High | 3.14% | 2.40% | 0.02% | 5.56% | |
| Georgia | Low | 5.32% | 2.30% | 2.25% | 9.87% |
| Middle | 4.30% | 2.30% | 3.17% | 9.77% | |
| High | 2.33% | 2.20% | 3.93% | 8.46% | |
| Hawaii | Low | 8.50% | 1.20% | 2.60% | 12.30% |
| Middle | 5.59% | 1.42% | 3.85% | 10.86% | |
| High | 3.06% | 1.26% | 4.40% | 8.72% | |
| Idaho | Low | 5.10% | 2.44% | 0.93% | 8.47% |
| Middle | 3.84% | 1.76% | 2.13% | 7.73% | |
| High | 2.06% | 1.60% | 4.29% | 7.94% | |
| Illinois | Low | 5.62% | 4.42% | 2.06% | 12.10% |
| Middle | 4.37% | 4.11% | 2.82% | 11.30% | |
| High | 2.48% | 4.36% | 3.00% | 9.83% | |
| Indiana | Low | 6.31% | 1.93% | 2.95% | 11.19% |
| Middle | 4.73% | 2.27% | 3.71% | 10.72% | |
| High | 2.49% | 2.05% | 3.66% | 8.19% | |
| Iowa | Low | 5.63% | 2.65% | 2.20% | 10.47% |
| Middle | 4.50% | 2.50% | 3.03% | 10.03% | |
| High | 2.24% | 2.57% | 4.10% | 8.90% | |
| Kansas | Low | 6.87% | 2.53% | 0.44% | 9.84% |
| Middle | 5.12% | 2.60% | 1.78% | 9.50% | |
| High | 2.99% | 2.68% | 2.64% | 8.31% | |
| Kentucky | Low | 5.14% | 1.71% | 3.77% | 10.62% |
| Middle | 3.83% | 1.74% | 4.87% | 10.44% | |
| High | 2.11% | 1.83% | 5.16% | 9.10% | |
| Louisiana | Low | 7.75% | 0.99% | 1.31% | 10.05% |
| Middle | 6.50% | 0.90% | 2.17% | 9.57% | |
| High | 3.39% | 0.92% | 2.60% | 6.91% | |
| Maine | Low | 5.20% | 3.01% | 1.15% | 9.35% |
| Middle | 3.80% | 3.26% | 2.54% | 9.60% | |
| High | 1.99% | 3.20% | 4.39% | 9.59% | |
| Maryland | Low | 5.25% | 2.04% | 2.41% | 9.70% |
| Middle | 4.02% | 2.48% | 4.30% | 10.80% | |
| High | 2.09% | 2.68% | 5.64% | 10.40% | |
| Massachusetts | Low | 3.92% | 3.77% | 2.23% | 9.92% |
| Middle | 2.95% | 3.22% | 3.67% | 9.85% | |
| High | 1.92% | 3.10% | 4.15% | 9.16% | |
| Michigan | Low | 4.97% | 2.01% | 2.52% | 9.50% |
| Middle | 3.58% | 2.60% | 3.32% | 9.50% | |
| High | 2.00% | 2.58% | 3.61% | 8.19% | |
| Minnesota | Low | 5.38% | 2.64% | 1.56% | 9.58% |
| Middle | 4.21% | 2.79% | 2.94% | 9.94% | |
| High | 2.41% | 2.73% | 4.78% | 9.92% | |
| Mississippi | Low | 7.17% | 2.20% | 1.40% | 10.77% |
| Middle | 5.78% | 2.07% | 2.34% | 10.19% | |
| High | 2.81% | 1.60% | 2.71% | 7.12% | |
| Missouri | Low | 5.14% | 2.68% | 1.68% | 9.51% |
| Middle | 3.99% | 2.30% | 2.91% | 9.20% | |
| High | 2.27% | 2.30% | 3.75% | 8.32% | |
| Montana | Low | 1.92% | 3.22% | 0.96% | 6.10% |
| Middle | 1.16% | 2.66% | 2.76% | 6.59% | |
| High | 0.46% | 2.29% | 3.67% | 6.42% | |
| Nebraska | Low | 5.82% | 3.61% | 0.80% | 10.23% |
| Middle | 4.57% | 3.31% | 2.53% | 10.41% | |
| High | 2.48% | 3.00% | 3.66% | 9.14% | |
| Nevada | Low | 4.80% | 1.60% | 0.60% | 7.00% |
| Middle | 3.59% | 2.16% | 0.53% | 6.28% | |
| High | 2.21% | 2.05% | 0.46% | 4.71% | |
| New Hampshire | Low | 2.19% | 5.20% | 0.60% | 7.99% |
| Middle | 1.65% | 5.18% | 0.60% | 7.43% | |
| High | 0.72% | 3.94% | 0.70% | 5.36% | |
| New Jersey | Low | 4.65% | 5.30% | 0.09% | 10.03% |
| Middle | 3.51% | 4.80% | 1.40% | 9.71% | |
| High | 2.02% | 5.07% | 3.20% | 10.29% | |
| New Mexico | Low | 7.98% | 1.80% | 0.60% | 10.37% |
| Middle | 6.13% | 1.74% | 2.16% | 10.03% | |
| High | 3.19% | 1.46% | 3.23% | 7.87% | |
| New York | Low | 6.37% | 4.30% | 0.21% | 10.89% |
| Middle | 4.75% | 4.17% | 3.49% | 12.41% | |
| High | 2.58% | 4.27% | 5.56% | 12.40% | |
| North Carolina | Low | 5.04% | 1.66% | 2.62% | 9.32% |
| Middle | 3.65% | 2.10% | 3.62% | 9.37% | |
| High | 2.02% | 2.05% | 4.33% | 8.40% | |
| North Dakota | Low | 6.34% | 1.50% | 0.53% | 8.37% |
| Middle | 5.58% | 1.57% | 0.78% | 7.92% | |
| High | 3.00% | 1.50% | 1.20% | 5.70% | |
| Ohio | Low | 5.88% | 3.18% | 2.40% | 11.46% |
| Middle | 4.57% | 2.60% | 3.34% | 10.51% | |
| High | 2.99% | 2.53% | 4.10% | 9.62% | |
| Oklahoma | Low | 6.80% | 1.94% | 1.16% | 9.90% |
| Middle | 5.37% | 1.53% | 2.44% | 9.34% | |
| High | 3.15% | 1.32% | 3.31% | 7.77% | |
| Oregon | Low | 1.53% | 3.47% | 3.00% | 7.99% |
| Middle | 0.93% | 2.84% | 4.74% | 8.51% | |
| High | 0.42% | 2.64% | 5.73% | 8.78% | |
| Pennsylvania | Low | 4.85% | 3.15% | 3.40% | 11.39% |
| Middle | 3.40% | 2.80% | 3.90% | 10.10% | |
| High | 1.95% | 3.00% | 3.96% | 8.91% | |
| Rhode Island | Low | 5.59% | 3.71% | 0.99% | 10.28% |
| Middle | 3.88% | 4.47% | 2.30% | 10.65% | |
| High | 2.17% | 4.39% | 3.30% | 9.85% | |
| South Carolina | Low | 4.12% | 2.09% | 0.88% | 7.08% |
| Middle | 3.61% | 2.05% | 2.35% | 8.01% | |
| High | 1.78% | 1.70% | 3.83% | 7.31% | |
| South Dakota | Low | 7.61% | 2.19% | 0.00% | 9.80% |
| Middle | 5.37% | 1.80% | 0.00% | 7.17% | |
| High | 3.09% | 2.09% | 0.00% | 5.17% | |
| Tennessee | Low | 7.44% | 1.73% | 0.00% | 9.17% |
| Middle | 5.41% | 1.51% | 0.10% | 7.02% | |
| High | 3.27% | 1.51% | 0.19% | 4.97% | |
| Texas | Low | 7.72% | 2.85% | 0.00% | 10.57% |
| Middle | 4.88% | 2.67% | 0.00% | 7.55% | |
| High | 3.34% | 3.19% | 0.00% | 6.53% | |
| Utah | Low | 5.64% | 1.96% | 1.00% | 8.60% |
| Middle | 3.65% | 1.70% | 3.35% | 8.70% | |
| High | 2.14% | 1.59% | 4.02% | 7.75% | |
| Vermont | Low | 4.64% | 4.50% | 0.20% | 9.34% |
| Middle | 3.55% | 4.71% | 1.61% | 9.86% | |
| High | 1.87% | 4.27% | 3.30% | 9.44% | |
| Virginia | Low | 4.01% | 2.40% | 2.41% | 8.81% |
| Middle | 3.00% | 2.30% | 3.49% | 8.80% | |
| High | 1.67% | 2.53% | 4.16% | 8.36% | |
| Washington | Low | 9.76% | 3.27% | 0.00% | 13.03% |
| Middle | 8.16% | 2.53% | 0.00% | 10.69% | |
| High | 4.17% | 2.22% | 0.00% | 6.38% | |
| West Virginia | Low | 5.48% | 1.28% | 1.89% | 8.65% |
| Middle | 4.44% | 1.19% | 3.29% | 8.93% | |
| High | 2.15% | 1.30% | 4.68% | 8.13% | |
| Wisconsin | Low | 5.04% | 3.23% | 1.49% | 9.76% |
| Middle | 3.60% | 3.52% | 3.56% | 10.68% | |
| High | 2.11% | 3.34% | 4.44% | 9.89% | |
| Wyoming | Low | 5.53% | 2.16% | 0.00% | 7.68% |
| Middle | 4.65% | 2.00% | 0.00% | 6.65% | |
| High | 2.22% | 1.76% | 0.00% | 3.98% |
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?
-
Michael Roberts
Associate Professor of Accounting, Co-President of The Tax Fairness Research Institute and Director of Accounting Program, University of Colorado Denver
-
Mona L. Hymel
Arthur W. Andrews Professor of Law at University of Arizona, James E. Rogers College of Law
-
Valrie Chambers
Associate Professor of Taxation and Accounting, M.E. Rinker, Sr. Institute for Tax and Accountancy, Stetson University
-
Morris R. Coats
Professor of Economics, Nicholls State University
-
Orly Mazur
Assistant Professor of Law, Dedman School of Law, Southern Methodist University
-
Anthony C. Infanti
Professor of Law, University of Pittsburgh School of Law
Michael Roberts
Mona L. Hymel
Valrie Chambers
Morris R. Coats
Orly Mazur
Anthony C. Infanti
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 2015 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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