When it comes to taxes, some states take a bigger bite out of residents’ incomes than others. Understanding where the highest tax burdens lie can be crucial for anyone considering a move or evaluating their financial situation.
The top ten states with the steepest overall tax rates reveal a landscape where income, property, and sales taxes combine to create significant financial obligations.
In this article, we’ll explore the states where taxpayers feel the most impact on their earnings.
From California’s staggering income tax rate to New York’s comprehensive tax structure, these states illustrate how tax policies can shape the economic reality for residents.
By examining the data, individuals can gain insights into which states might be more financially burdensome and why that matters for their personal finances.
1: New York
New York tops the list for the most significant tax burden in the United States. Residents face an overall tax rate of 15.9%, driven by high income, property, and sales taxes.
The income tax in New York features a graduated rate, reaching up to 10.9% for those earning over $25 million, while middle-class individuals pay between 5.85% and 6.25%.
Sales taxes also add to the financial strain, with a state rate of 4% and an average local rate of 4.52%, bringing the combined sales tax to 8.52%.
Property taxes hover at a mean effective rate of 1.38% on owner-occupied homes, making housing costs substantial.
Excise taxes in New York rank among the highest in the country, further intensifying the financial pressure on its residents.
2: Hawaii
Hawaii ranks as the second state with the highest overall tax burden, with residents paying nearly 14% of their income to state and local governments.
This significant tax impact stems primarily from income taxes, where individuals face an average rate of 42%. Contributing to the overall burden, homeowners in Hawaii pay about 26% in property taxes.
Sales and excise taxes also add to the financial load, averaging 7.2%. It’s crucial to understand that these multiple tax layers combine to affect the overall disposable income for residents.
Hawaii’s tax structure highlights the financial challenges faced by its residents, making it essential for potential movers to consider the economic implications carefully.
3: Maine
Maine ranks as the third state with the highest overall tax burden, where residents pay approximately 12.4% of their income in taxes.
Property taxes are particularly high in this state, averaging around 1.13%, which leads to a significant financial impact on homeowners.
Individuals in Maine also face an income tax structure with a top marginal rate of 7.15%. This progressive rate means higher earners contribute a larger percentage of their income.
Sales taxes in Maine sit at 5.5%, lower than some neighboring states, but combined with property and income taxes, the overall financial obligation can be overwhelming.
Tax policies in Maine often compel residents to reassess their economic situations, especially those considering relocating for financial benefits.
4: Vermont
Vermont ranks fourth in terms of overall tax burden, with residents paying about 13.6% of their income in taxes. High income taxes contribute significantly, with a top marginal rate of 8.75%, affecting those with taxable incomes over $200,000.
Property taxes also add to the financial load, averaging around 1.9% for owner-occupied homes, making housing costs a considerable concern.
Sales taxes are relatively moderate at 6%, but the combination of these tax types can lead to a notable impact on disposable income, compelling residents to carefully evaluate their financial landscape.
Consequently, potential movers should take these factors into account when considering Vermont as their next home.
5: Connecticut
Connecticut ranks as one of the states with a significant tax burden, where residents pay approximately 15.4% of their income in taxes.
This high percentage stems from a combination of income, property, and sales taxes. Individuals face a top marginal income tax rate of 13.3%, one of the highest in the nation.
Also, homeowners in Connecticut encounter property taxes averaging around 1.63%, contributing to the financial load. Sales taxes also impact residents, with a base rate of 6.35%.
Collectively, these tax obligations create a substantial economic strain on residents, influencing their overall financial well-being.
6: New Jersey
New Jersey ranks as one of the states with a high overall tax burden, with residents paying about 13.2% of their income in various taxes.
A significant contributor to this tax landscape is the property tax, leading the nation with an average effective rate of 2.21%. This high property tax can strain homeowners financially.
Also, state income taxes in New Jersey can reach up to 10.8% for top earners, putting even more pressure on those with higher incomes.
Sales taxes, while lower than some states at 6.625%, add another layer to the financial obligations. Overall, the combination of these taxes forces residents to manage their financial priorities carefully.
7: Maryland
Maryland ranks as one of the states with a significant tax burden, where residents pay approximately 10.9% of their income in taxes.
Property taxes play a major role here, averaging about 1.06% for homeowners, which can add to financial pressure.
Income taxes are tiered, with a top marginal rate of 5.75%, affecting those earning over $250,000. Sales taxes further compound the issue, standing at 6%.
The cumulative effect of these taxes can lead to notable constraints on disposable income, prompting residents to carefully evaluate their financial planning.
8: Minnesota
Minnesota ranks among the states with a substantial tax burden, where residents contribute about 9.85% of their income to various taxes.
The state’s income tax structure features a top marginal rate of 9.85% for high earners, significantly impacting their take-home pay.
Property taxes further exacerbate financial obligations, averaging around 1.13% for homeowners. Also, sales taxes in Minnesota average 6.875%, which contributes to the overall economic pressure on its residents.
Collectively, these factors create a challenging financial landscape, prompting individuals to carefully assess their economic decisions.
9: Illinois
Illinois ranks as one of the states with a significant tax burden, with residents paying around 12.9% of their income in various taxes.
Individuals face a top marginal income tax rate of 4.95%, impacting high earners directly. Property taxes also contribute heavily, averaging about 2.05% for homeowners, making housing costs a considerable concern.
Homeowners in Illinois often feel the pinch as these rates rank among the highest in the nation. Combined with sales taxes averaging 8.8%, the total financial obligation can be daunting.
Overall, Illinois’ tax landscape prompts residents to strategize their financial priorities carefully.
10: Iowa
Iowa ranks at number ten with residents paying around 10.3% of their income in taxes. The individual income tax rate has recently seen changes, decreasing from 6% to 5.7%.
Also, this state’s property taxes hover around 1.3%, which compounds the overall tax burden.
Iowa’s sales tax averages 6%, contributing further to financial obligations. The state has made significant reforms, aiming to improve tax burdens in the long run.
As these changes continue phasing in, Iowans may see their tax obligations shift positively.
Consequently, residents are encouraged to evaluate their financial strategies amidst the evolving tax landscape.
Alicia Richards