The Income Tax Burden
One thing people look at when comparing state taxes is the tax burden of living in each state. The tax burden is the total amount you would pay in taxes. Because each state has a different rate of income tax (and different rates of sales and other taxes), the tax burden can vary greatly from state to state. If you're nearing retirement and want to know which state you'll pay the highest income taxes in, comparing tax burdens is a good way to find out.
There are several ways to look at the state tax burden. One way is to look at the tax burden just for personal income taxes. That means comparing states based on how much the average person in each state pays in income taxes as a percentage of his or her income. In 2020, the state with the highest individual income tax burden as a percentage of personal income was New York. The next four most expensive states were Oregon, Maryland, Minnesota and California. The states with the lowest individual income tax burdens were, of course, the eight states that did not charge an income tax at all.
Another way to look at the tax burden, and the most useful if you're using it as a basis for deciding where to live, is to look at a state's overall tax burden: property, individual income, and sales and excise taxes. In that case, New York had the highest tax burden in 2020, at 12.28 percent, with the next four most expensive states being Hawaii, Vermont, Maine and Minnesota. The states with the least expensive overall tax burden in 2020 were Alaska, at 5.16 percent, followed by Delaware, Tennessee, Wyoming and Florida.
For more information about income taxes, tax deductions and taxes in general, take a look at the links that follow.
State Income Taxes
What are the income brackets for 2020?
Which state has the highest taxes in the US?
Do California residents pay state income tax?
What is California's income tax rate 2020?
How do I calculate my overall tax rate?
More Great Links
- Cammenga, Janelle. "To What Extent Does Your State Rely on Individual Income Taxes?" Tax Foundation. Feb. 10, 2021. (Feb. 22, 2021) https://taxfoundation.org/state-income-tax-reliance-2021/
- Loughhead, Katherine. "State Individual Income Tax Rates and Brackets for 2021." Tax Foundation. (Feb. 22, 2021) https://files.taxfoundation.org/20210217114725/State-Individual-Income-Tax-Rates-and-Brackets-for-2021.pdf
- McCann, Adam. "2020's Tax Burden by State." Wallet Hub. June 24, 2020. (Feb. 22, 2021) https://wallethub.com/edu/states-with-highest-lowest-tax-burden/20494
- Moreno, Tonya. "States Where Cities and Counties Levy Additional Income Taxes." The Balance. Feb. 3, 2021. (Feb. 22, 2021) https://www.thebalance.com/cities-that-levy-income-taxes-3193246
- Orem, Tina. "2020-2021 Tax Brackets and Federal Income Tax Rates." Nerd Wallet. Nov. 16, 2020. (Feb. 22, 2021)
- Orem, Tina. "2020-2021 Tax Brackets and Federal Income Tax Rates." Nerd Wallet. Nov. 16, 2020. (Feb. 22, 2021) https://www.nerdwallet.com/article/taxes/federal-income-tax-brackets
- Tax Policy Center. "State and Local Tax Policy: How do state and local income taxes work?" (March 3, 2010). http://www.taxpolicycenter.org/briefing-book/state-local/specific/income.cfm
- Wilkes, Duncan. Personal Interview. February 28, 2010.