Worst State Taxes: Ranking by Total Burden

Determining which state has the “worst” taxes depends on an individual’s financial situation, including income, spending habits, and property ownership. A high-tax state for a wealthy person might have a lighter impact on a middle-income family or a retiree. To provide a clear comparison, this analysis focuses on the total tax burden, which measures the percentage of income residents pay in combined state and local taxes. This metric offers a more complete picture of how different tax structures affect the financial lives of their residents.

Key State and Local Tax Categories

State income tax is a primary component of the tax burden in most states. These systems are either progressive, applying higher tax rates to higher incomes, or flat, applying a single rate to all income levels. Several states have no personal income tax, relying more heavily on other taxes to generate revenue.

Property tax represents another significant portion of a household’s tax obligation. These taxes are levied by local governments, such as counties, cities, and school districts. The amount owed is based on a property’s assessed value, and the revenue funds local services like public schools, law enforcement, and fire departments.

Sales tax is a consumption-based tax applied to the sale of goods and services. The total rate combines a statewide rate with local taxes from cities and counties, leading to different effective rates within the same state. Many states exempt necessities like groceries and prescription drugs to lessen the impact on lower-income households.

A few states impose an estate or inheritance tax, triggered by the transfer of wealth after death. An estate tax is paid by the deceased person’s estate before assets are distributed. An inheritance tax is less common and is levied on the individuals who receive the assets, with the liability often depending on the heir’s relationship to the deceased.

Methodology for Ranking

This analysis uses the “total state-local tax burden” to compare states. This metric is the percentage of residents’ collective income paid in all state and local taxes, including property, income, and sales taxes. Measuring taxes as a share of income provides a standardized way to compare costs.

The data is sourced from non-partisan research organizations that use government figures to calculate effective tax rates for each state. The rankings reflect the tax impact on a state’s median taxpayer, considering that state’s specific income levels and consumption patterns.

States with the Highest Overall Tax Burden

New York consistently ranks as one of the states with the highest overall tax burden in the nation, at approximately 12.0%. This is driven by a highly progressive income tax structure with rates reaching up to 10.9% for high earners. This is compounded by some of the highest property tax rates in the country, particularly in suburban areas.

Hawaii also imposes a substantial tax burden on its residents, with a total load of approximately 11.8% of personal income. While its property tax burden is comparatively moderate, the state’s income tax is a major factor, with a top marginal rate of 11%. Hawaii also has a broad general excise tax that functions similarly to a sales tax but is applied to nearly all business activities, often passed on to consumers.

California’s tax system is characterized by having the highest top marginal income tax rate in the country, at 13.3% for its wealthiest residents. Combined with the nation’s highest statewide sales tax of 7.25%, this results in an overall tax burden of about 10.4%. Although property taxes are constrained by state law, high income and sales taxes make California one of the most expensive states for high-income individuals.

Connecticut is another state where residents face a high tax environment, with a total burden of about 10.1%. The state has a progressive income tax with rates that can reach 6.99%, and property taxes are also a major contributor. The combination of these taxes heavily impacts residents in higher income brackets and those who own valuable real estate.

Illinois residents face one of the higher tax burdens in the country, with an average of 9.7% of their income going to state and local taxes. The primary factor is the state’s very high property taxes, which are among the highest in the nation. While Illinois has a flat income tax, the weight of property taxes and high urban sales taxes creates a costly environment.

New Jersey is well-known for its high tax burden of approximately 9.5%, driven primarily by the highest effective property tax rates in the United States. These property taxes place a financial strain on homeowners across the state. While its income tax is progressive, the scale of property tax collections is the main reason for its high ranking.

Impact on Different Taxpayer Profiles

The definition of a “worst” tax state changes significantly when viewed through the lens of different taxpayer profiles. For high-income earners, states with highly progressive income tax systems often present the greatest burden. In these states, top marginal rates can exceed 10%, meaning a substantial portion of earnings for top professionals and business owners is directed toward state taxes.

Retirees often face a different set of tax considerations, making property taxes a more pressing concern. In states with exceptionally high property taxes, retirees on fixed incomes can find it challenging to manage these costs. Some states also tax Social Security benefits, which can further diminish retirement income. The presence of estate or inheritance taxes is another factor that can heavily influence the financial picture for retirees and their heirs.

For low-to-middle-income families, states that rely heavily on sales and excise taxes can be particularly burdensome. These taxes are considered regressive because they consume a larger percentage of income from those who earn less. A high statewide sales tax means that a larger portion of a family’s budget for necessities is lost to taxes, which can make states with low or no income tax less advantageous for this demographic.