Best states for taxpayers

The tax deadline has just passed and some people will bear the tax burden more than others at least partly due to the state in which they reside. The five states with the lowest taxation are: Nevada, Montana, Alaska, Wyoming and Delaware.

The statistics based on analysis by WalletHub also indicated the five worst states, namely; Nebraska, Pennsylvania, Illinois, New York and Connecticut.

The claims have been backed by similar studies such as one by Kiplinger who found that Nevada, Alaska and Wyoming were among the five top most states while New York and Illinois fell in the five worst states.

Map with the best and worst states for taxes

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Lighter blue: lowest tax burden, darker blue: highest tax burden.
Score 1 = lowest, 50 = highest

Ranking is based on several reasons

Four taxation types were used by WalletHub as a foundation on which to develop the ranking. The taxation types are:

  • Income Tax
  • Real-Estate Tax
  • Sales & Excise Tax and
  • Vehicle Property Tax

Following is a breakdown of the individual types of taxation as was determined by WalletHub: Owning a home in New Jersey is by all means not cheap. The rate of effective real-estate tax (also referred to as property tax) in New Jersey is the highest in the nation – at 8.13%.

Illinois follows at 7.71%, then New Hampshire at 7.33%, Connecticut at 6.89% and the 5th highest is Wisconsin at 6.47%.

In calculating the rates, WalletHub divided the state’s effective medial real-estate tax to the median income.

Tax on gas

Tax on gas is also a contributory factor. Tax charged per gallon is lowest in Alaska. Missouri follows, then Mississippi, New Mexico and 5th are Arizona. The highest amount per gallon is charged in Pennsylvania and trailing behind are:

  • California
  • Washington
  • Hawaii
  • New York

Property Taxes

If property taxes were to be prioritized, it should be noted that Hawaii recorded the lowest rate (at 0.90%). The other states whose rate is under 2% and that trail behind Hawaii are:

  • Alabama
  • Louisiana
  • D.C.
  • Colorado

Best states for Income tax

About income tax, Texas, Wyoming, South Dakota, Alaska, Washington and Florida are among states whose rate is 0%. A stark contrast is Kentucky where the rate of income tax is 5.01%. Other states in which the rate of income tax is above 4% are Oregon, Pennsylvania and Maryland.

Sales and excise tax

The rates of Sales and excise tax – also referred to as consumption tax – are also different across the nation. In Delaware, Montana, Alaska, New Hampshire and Oregon, the rate is well under 2%. This differs significantly from South Dakota and Washington where a considerably higher rate (at 8.65%) is charged. In Arkansas, Louisiana and Texas, the rate is also high as it is above 6%.

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