Where You'll Pay the Most in State and Local Taxes (2024)

Some states have highsales taxesandproperty taxesbutno income taxes. Other states have no sales taxes but high income taxes. Overall, taxes at the state and local levels can dramatically impact the cost of living for consumers. Understanding various state taxes can give you an idea of how the highest- and lowest-taxed states differ which can be helpful if you're considering moving a particular state, like when it's time to retire.

Key Takeaways

  • Sales tax is levied by states on the purchase of goods and services. In addition to states, some local governments can also impose sales tax.
  • Tennessee and Louisiana have the highest combined sales tax while Alaska and Hawaii are states with some of the lowest sales tax rates
  • California and Hawaii rank the highest in state income taxes while North Dakota and Pennsylvania have the lowest state income tax rates
  • Seven states—Alaska, Florida, Nevada, South Dakota, Texas, Tennessee, and Wyoming— levy no income tax
  • New Jersey and New Hampshire have some of the highest property rates in the country while Hawaii and Alabama have some of the lowest.

State Sales Taxes

Sales taxes are thepercentage you pay over and above sales prices when you purchase certain items. Most states rely heavily on these taxes to meet their fiscal needs.

Municipalities and counties sometimes have their own sales taxes in addition to those charged at the state level. The Tax Foundation, a leading source for tax information, provides comprehensive annual rankings based on various taxes overall.

According to the Tax Foundation, the five states with the highest combined sales taxes at the state and local levels as of 2022 are as follows:

  • Tennessee: 9.55%
  • Louisiana: 9.55%
  • Arkansas: 9.47%
  • Washington: 9.29%
  • Alabama: 9.24%

The states with the lowest combined sales taxes are as follows:

  • Alaska: 1.76%
  • Hawaii: 4.44%
  • Wyoming: 5.22%
  • Wisconsin: 5.43%
  • Maine: 5.50%

Four states have no sales tax at all: Delaware, Montana, New Hampshire, and Oregon.

State Income Taxes

Seven states impose no tax on residents' incomes as of 2022: Alaska, Florida, Nevada, South Dakota, Texas, Tennessee, and Wyoming. New Hampshire taxes only interest and dividend income, while Washington taxes only high earners, and then only capital gains income.

At the other end of the scale arestates with walloping tax ratesat the highest income levels. The top five states by income tax rate in 2022 are as follows:

  • California: up to 13.3%
  • Hawaii: up to 11%
  • New York: 10.9%
  • New Jersey: 10.75%
  • Washington D.C.: 10.75%

You'll note that none of these states also make the list for the highest state and local sales taxes, so residents do receive a little bit of a break there. The bottom states by income tax rate in 2022 are as follows:

  • North Dakota: 2.9% and lower
  • Pennsylvania: 3.07% (flat)
  • Indiana: 3.23% (flat)
  • Ohio: 3.99% and lower
  • Michigan: 4.25% and lower
  • Louisiana: 4.25% and lower

Property Tax Rates

Property taxes are generally imposed at the local level. New Jersey municipalities are known for having the highest property taxes at a median rate of 1.89%, and Louisiana has the lowest at 0.18%. Half of all property taxes are higher than the median, and half are lower.

Trailing New Jersey but still making the top five states for the most burdensome property taxes are as follows:

  • New Hampshire: 1.86%
  • Texas: 1.81%
  • Nebraska: 1.76%
  • Wisconsin: 1.76%

At the other end of the spectrum, the four states joining Louisiana for the five lowest median property tax rates are as follows:

  • Hawaii: 0.26%
  • Alabama: 0.33%
  • Delaware: 0.43%
  • West Virginia: 0.49%

Notably, Alabama offsets its ranking here with its high sales taxes. Also note that Washington, D.C., though not a state, falls near the bottom of the list with a 0.46% property tax rate.

Putting It All Together

These lists only report the highest and lowest states in each category. Consumers will find that the majority of states charge income taxes along with hefty additional state and local taxes. Looking at each of these categories comprehensively for your individual situation can keep you informed regarding your own goals, and it might greatly help to potentially influence your choice of the state in which you want to live, particularly in retirement.

Note

Property taxes wouldn't be a consideration if you plan to rent rather than own your home, while income tax—or the lack of one—would be more of a consideration for high-income earners.

Other Things to Think About

Combined taxes are tracked by the U.S. Census Bureau, which generally looks at taxes as a percentage of revenue. As of the first quarter of 2022, combined tax revenues for property, sales and gross receipts, and income taxes amounted to $513.3 billion across the U.S.

Each state has a unique mix of taxes that affects both residents and non-residents. This makes creating a comprehensive ranking of overall tax burdens an even more difficult undertaking and one that can be looked at in several ways. The U.S. Census Bureau’s quarterly data report helps provide insight on total tax revenue, which takes into account taxes paid by residents and nonresidents.

It can be important to consider taxes as they contribute to state revenue and budgets as well as those that affect local consumers.

Frequently Asked Questions (FAQs)

Which sates have the highest and lowest property taxes?

Property tax is paid by the owner of a property to the local government. States such as New Jersey and New Hampshire have some of the highest property tax rates in the country whereas Hawaii and Alabama are states with the lowest property tax rates.

Which states have the highest and lowest income taxes?

State income tax is levied on income that is earned in the state. While most states in the U.S. impose an income tax, they have differing rates. California with a top marginal rate of 13.3% and Hawaii with a top rate of 11% are the states with the highest income tax rates. Seven states impose no income tax while nine states impose a flat rate.

Where You'll Pay the Most in State and Local Taxes (2024)

FAQs

Where do you pay most taxes? ›

Snapshot
  • The highest personal income tax rates in 2021-23 were found in Ivory Coast (60%), Finland (56.95%), and Denmark (56.00%).
  • Bhutan has the highest sales tax at 50%, followed by Hungary (27%), with Croatia, Denmark, Norway, and Sweden tied at 25%.

Where do people pay the highest taxes? ›

States with the heaviest tax burden:
  • New York: 12.47%
  • Hawaii: 2.31%
  • Maine: 11.14%
  • Vermont: 10.28%
  • Connecticut: 9.83%
  • New Jersey: 9.76%
  • Maryland: 9.44%
  • Minnesota: 9.41%
Apr 5, 2024

What are 2 areas in which your state and local taxes go to paying? ›

By far the largest areas of state spending, on average, are education (both K-12 and higher education) and health care. States are one of the main funders of the nation's public elementary and secondary schools, which some 51 million students — nine out of ten enrolled school-age children — attend.

Who pays most of the taxes? ›

High-Income Taxpayers Paid the Majority of Federal Income Taxes. In 2021, the bottom half of taxpayers earned 10.4 percent of total AGI and paid 2.3 percent of all federal individual income taxes. The top 1 percent earned 26.3 percent of total AGI and paid 45.8 percent of all federal income taxes.

Where is the best place in the US for taxes? ›

Alaska had the lowest average overall tax burden – measured as total individual taxes paid divided by total personal income – at 5.4%, followed by Tennessee (6.3%), New Hampshire (6.4%), Wyoming (6.6%) and Florida (6.7%).

Which state has no income tax? ›

Which Are the Tax-Free States? Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming are the only states that do not levy a state income tax. Note that Washington does levy a state capital gains tax on certain high earners.

What 10 states have the highest taxes? ›

These are the 10 states where taxpayers pay the highest percentage of their income
RankStatePercentage of overall tax burden
1New York15.9%
2Connecticut15.4%
3Hawaii14.1%
4Vermont13.6%
6 more rows
Feb 24, 2024

What is the best state to live in based on taxes? ›

At the top of the list are the 9 states with no state earned income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. That's not to say these are no-tax states. Many make up revenues with higher property taxes, sales tax, and other taxes and fees.

What state has the lowest state tax? ›

  • Alaska. #1 in Low Tax Burden. #45 in Best States Overall. ...
  • Florida. #2 in Low Tax Burden. #9 in Best States Overall. ...
  • South Dakota. #3 in Low Tax Burden. ...
  • Wyoming. #4 in Low Tax Burden. ...
  • Tennessee. #5 in Low Tax Burden. ...
  • New Hampshire. #6 in Low Tax Burden. ...
  • Texas. #7 in Low Tax Burden. ...
  • Oklahoma. #8 in Low Tax Burden.

Where do most taxes go in the US? ›

Approximately 62% of all government expenditure goes directly to “mandatory” spending, social programs automatically funded without periodic congressional approval. That would be approximately $8,800 of your tax returns, distributed like this: $3,000 for Social Security. $2,000 for Medicare.

What area has the highest taxes? ›

Rankings from the Tax Foundation list New York as the state with the highest tax burden followed by Connecticut and Hawaii. On the other end of the list Alaska, Wyoming and Tennessee are considered to have the lowest tax burdens.

Who pays the most state taxes? ›

Taxpayers remit taxes to both their home state and to other states, and about 20 percent of state tax revenue comes from nonresidents. Our tax burdens analysis accounts for this tax exporting. New Yorkers faced the highest burden, with 15.9 percent of net product in the state going to state and local taxes.

Where do most local taxes go? ›

State and local spending keeps communities running, whether through funding to repair local public schools and pay teachers, run police departments, provide housing subsidies to low-income families, help seniors pay utility bills, or operate other programs.

What state and local taxes pay for? ›

The Bottom Line. State and local governments use taxes to pay for public services and infrastructure that benefit their residents. In addition to sales and property taxes, many states and municipalities also levy income taxes on the wages of their residents. Constitution Annotated.

Where do the majority of my taxes go? ›

An overwhelming majority of your tax dollars are being used to finance benefits programs on the brink of insolvency or paying interest on our national debt.

Where is the best place to not pay taxes? ›

Tax-free states
  • Alaska.
  • Florida.
  • Nevada.
  • South Dakota.
  • Texas.
  • Washington.
  • Wyoming.

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