States Where Americans Are Paying the Most Taxes

by Evan Comen and Thomas C. Frohlich, WS24/7, February 16, 2018

In the U.S. federalist system, each state government decides how to generate revenue — that is, which taxes to collect, and how. No state tax code is identical and, largely as a result, what the average American pays annually in taxes varies from state to state.

24/7 Wall St. reviewed the tax burden of residents in each state — the portion of income that goes to state and local governments’ taxes — from the report, “Facts & Figures 2017: How Does Your State Compare?” provided by tax policy research organization Tax Foundation. These tax burdens do not include the federal taxes paid by all Americans regardless of state.

According to the report, tax burdens in the 2012 tax season were as low as 6.5% in Alaska and as high as 12.7% in New York.  (Hawaii 10.2%)

In addition to federal, state, and local taxes, Americans pay taxes to other states. Out-of-state visitors pay sales taxes as tourists, investors pay capital gains taxes on investments in other states, and drivers filling up at gas stations in other states pay those states’ excise taxes. For this reason, the tax burden is not always a perfect reflection of taxes collected.

Approximately 78% of taxes Americans pay go to their own state and local governments. The variation in tax burden between states is due largely to differences in each state’s tax code. High tax states tend to collect more taxes and at higher rates.

While most states tend to collect income, property, and sales taxes among several others, not all states collect all taxes and not at the same rate. High tax burden states collect more taxes and at higher rates, while lower burden states collect less taxes and at lower rates.

For example, in the 10 highest burden states, individual income tax collections per capita in fiscal 2015 exceeded the national average of $967. By contrast, five of the 10 states with the lowest tax burden collect no income tax. Similarly, property taxes tend to exceed the national average in high burden states, while they tend to be lower in states at the other end of the tax burden spectrum.

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37. Hawaii (13th-highest)

• Taxes paid as pct. of income: 10.2%
• Income per capita: $50,363 (18th highest)
• Income tax collections per capita: $1,389 (10th highest)
• Property tax collections per capita: $980 (17th lowest)
• General sales tax collections per capita: $2,090 (the highest)